David Haffner, CEO of Leggett & Platt Inc. (LEG), was spending a few days in April 2009 visiting with Wall Street analysts in New York City. Sales reports of the Carthage, Mo.-based manufacturer of items ranging from bedsprings to office furniture and industrial tubing with $3.1 billion in 2009 revenues were telling Haffner that U.S. consumers were scared and pulling back on their spending. Analysts agreed: One cited a recent poll in which 25 percent of respondents said they were afraid of losing their jobs.
These days Haffner is hearing a different message. “I’m not declaring victory yet, but we are seeing good signs,” he says. That sentiment is shared by the majority of respondents in the sixth annual NYSE Euronext CEO Report. In last year’s survey, chief executives worldwide were focused on the road to recovery. Today they are focused on returning to growth.
U.S. chief executives are clearly starting to feel better about economic conditions in their home market. After steering their companies through the most bruising economic downturn since the Great Depression, nearly 70 percent of U.S. CEOs describe economic conditions at home as either good or fair, compared with 10 percent who felt that way last year. Non-U.S. CEOs concur: About 60 percent rate the U.S. economy as fair or good, compared with 9 percent a year ago. Asked to explain this uptick in optimism, the chief executive of one Netherlands-based company responded succinctly: “It’s because of the U.S.’s entrepreneurial mentality.”
READ MORE
Jobs Wanted
Chief executives are also more optimistic about the state of the global economy. While few CEOs rate global economic conditions as excellent or good, the study finds fewer executives than last year saying conditions are poor, with more than four in 10 CEOs expecting the global economy to fully recover by the second half of 2011 or sooner. The majority of CEOs (59 percent) expect the global economy to recover in 2012 or later. Non-U.S. CEOs, however, are significantly more optimistic, with 61 percent saying they believe a full global recovery will occur by the second half of 2011 or sooner.
Still, the recovery is not without skeptics. Count James P. Dolan among them. Dolan runs The Dolan Co. (DM), a Minneapolis-based business information and services company that reported $77 million in revenues for the first quarter of 2010, up 20 percent over the same quarter last year. Even so, Dolan doesn’t anticipate a full U.S. recovery until at least 2012. He believes that any improvement will depend largely on the health of the housing market. “There are more than 7 million pending foreclosures in the U.S.,” he says. “Until those loans get pushed through the system, the housing market is going to remain weak. And housing affects so many things, including consumer confidence and consumer spending.”
By the Numbers
80%
of CEOs expect improvement in company growth through 2011
By the Numbers
69%
of CEOs believe that increased hiring is one of the best indicators of a full recovery
Housing isn’t the only blot on the economic landscape, of course. “Until the unemployment rate drops in a meaningful way, the coast isn’t clear,” says Mark Zandi, chief economist at Moody’s Analytics, a unit of Moody’s Corp. (MCO). “Consumer confidence — and the spending that accompanies it — goes up with a better jobs picture.” McDonald’s Corp. (MCD) CEO James Skinner concurs. But even though McDonald’s maintained a steady hiring pace through the recession, Skinner is convinced that high unemployment equals slow recovery. “Until consumers are confident about their opportunity to work, spending will be restricted,” he says.
Yet signs indicate that many consumers are ready to open their wallets again, and that’s cause for good cheer among CEOs across a wide range of industries. “Consumers haven’t rolled over and died like everyone feared they would,” says Douglas G. Bergeron, CEO of Verifone Systems Inc. (PAY), an electronic payments provider based in San Jose with $845 million in fiscal year 2009 revenues. Retail sales rose in each of the past eight months, according to the U.S. Commerce Department. One consumer bellwether, appliance manufacturer Whirlpool Corp. (WHR), reported that its earnings more than doubled in the first quarter of 2010 compared with the same quarter last year, reflecting increased confidence among homeowners.
What’s driving that confidence? In part, the fact that U.S. consumers have shed $600 billion in household debt since fall 2008. “There’s been a massive deleveraging taking place,” says Zandi. “Just like companies have cleaned up their balance sheets, so too have consumers.”
