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Executive Confidence Stagnates Under ContinuedCost PressureHaving rebounded in Q1 2012 from its second lowest reading, CEBs BusinessExecutives Sentiment Index remained below the neutral mark of 50 due to cost

pressure concerns.Having rebounded in Q1 2012 from its second lowest reading, CEBs Business Executives

Sentiment Index (Figure 23) remained below the neutral mark of 50 due to cost pressure

concerns.

1. Growth Outlook Improves Marginally in Q2 2012

The percentage of executives anticipating top-line revenue growth in the next 12 months

increased marginally from 66% to 69%. Executive expectations about growth at industry peersimproved marginally as well: 57% of executives expect higher industry revenues (up from 52%

last quarter).

The outlook for new orders improved again with 66% of operations executives now expecting an

increase (up from 60% in Q1 2012). In addition, 61% of respondents expect higher production

levels in the next 12 months (versus 57% in Q1; Figure 24).

Executive sentiment about consumer confidence improved relative to last quarter. Thirty-eight

percent of executives now expect consumer confidence to improve during the next 12 months

(up from 31% in Q1). Seventy-one percent of sales executives expect higher sales to new

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customers (up from 64% in Q1; Figure 25).

2. Cost Concerns Remain Elevated

Seventy-one percent of executives expect cost pressure to increase, up from 68% in Q1 2012.

Expectations for energy costs, in particular, worsened. Sixty-four percent believe energy costs

will be higher (compared to 57% last quarter).Expectations for core input prices also deteriorated (68% expect higher inputs prices versus

61% last quarter).

Budget outlooks remain tight. More finance executives (40%) expect general and administrative

expenses to shrink in the next year than those (39%) who expect them to grow. Fewer

executives expect higher budgets in Finance, Marketing (Figure 26) and HR.

3. Investment Expectations Improve, but Hiring Outlook Remains Weak

Only 38% of executives expect total headcount to increase (versus 36% last quarter). A full 32%

of executives expect lower headcount in the next 12 months.Expectations for higher investments improved only marginally. Forty-nine percent of executives

expect to increase capital expenditures (up from 47% in Q1 2012). Forty-two percent of

executives expect greater R&D expenditures in the next 12 months, a marginal change from Q1

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2012 (Figure 27).

If you have any questions about this article, please e-mail Oleg Polishchuk

atpolishco@executiveboard.com

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