Economic Outlook Declines Slightly at End of Year but Remains Higher Than in First Two Quarters

The fourth quarter 2018 CEO Economic Outlook survey by the University of Richmond’s Robins School of Business and the Virginia Council of CEOs finds that Virginia CEOs’ expectations for sales and capital spending over the next six months fell compared to their expectations last quarter, while expectations for increased employment rose. Overall, expectations at the end of the year remained higher than their expectations in the first and second quarters of the year.

Last quarter, CEOs were asked how a Democratic takeover of Congress would impact the outlook for their business over the next 12 months. This quarter, with the results of the mid-term elections known, CEOs were asked what impact the new makeup of Congress would have on their outlook for the next 12 months. Although the questions were not identical, it appears that regional CEOs prefer the makeup of the upcoming Congress to one where Democrats control both chambers. Results are portrayed in the table below.

Expectations for employment rose from last quarter. More than 60 percent of respondent CEOs expect employment to increase over the next six months, up nearly three percentage points from the third quarter survey. Roughly 35 percent expect employment to remain flat, down from 44 percent in the third quarter; only about four percent of CEOs expect employment to decrease over the next six months.

Seventy-one percent of CEO respondents expect sales to increase over the next six months, down eight percentage points from the third quarter results. Nearly 32 percent expect sales to increase by more than 10 percentage points, down five percentage points from last quarter. But 14 percent expect sales to fall, up from less than five percent last quarter.

Expectations for capital spending fell from last quarter. Thirty-three percent of CEOs expect capital spending to increase, down nearly nine percentage points from last quarter. More than 57 percent expect capital spending to remain flat, up nine percentage points from last quarter, while the percentage who expected capital spending to decrease over the next six months remained roughly equal to last quarter.

The Robins School and VACEOs jointly conduct the quarterly survey, which regularly asks about expectations for sales, capital spending and employment, plus other relevant issues, helping Virginia companies anticipate business conditions and plan for growth. The Robins School adapted the survey from the Business Roundtable, an association of CEOs of American companies that conducts a similar survey nationally. Randy Raggio, associate dean at the Robins School, administers the survey and collects the responses each quarter. The survey has been administered quarterly since 2010.

The following survey results from the third quarter of 2018 and fourth quarter of 2018 show projections for the next six months for sales, spending and employment:

Projected 6 months sales, spending and employment

“The survey shows that CEOs remain positive on the economy,” said Raggio. “Despite recent drops in the stock market, most see strong demand and expect 2019 to be profitable.”

“In all industries and sectors, the CEOs I work with report that demand remains very high. Most don’t expect a recession until 2020,” said Scot McRoberts, executive director of the Virginia Council of CEOs.

Economic Outlook Index

* Record high

Ninety-one CEOs responded to the survey, which was administered December 17-21. Multiple industries are represented in the sample, including construction, manufacturing, finance and insurance and retail. The average company whose CEO responded to this survey had about $10.5 million in revenue for the most recent 12-month period. The average employment was about 55.

The Council continues to expand the survey beyond its members, offering any area business owners whose companies gross at least $1 million in annual revenue the opportunity to participate. If enough businesses participate, the Council will provide survey results by industry. Participation is free, and all participants will receive copies of the survey data.

Business owners and CEOs who would like to participate in the next survey should contact Scot McRoberts at smcroberts@vaceos.org.

The Virginia Council of CEOs is a nonprofit association whose mission is to connect the CEOs of small and mid-sized businesses for learning and growth. The Council is led by a volunteer board of directors, advisory board and a small staff. Currently, there are 240 CEO members. Learn more at www.vaceos.org.

The Robins School of Business is the only fully accredited, highly-ranked undergraduate business school that also is part of a highly-ranked liberal arts university. U.S. News ranks the Robins School’s part-time MBA program #44 in the country. The school’s executive education division offers open enrollment courses and customized leadership development, training and consulting to area businesses.