ARLINGTON, Va., May 31, 2011 /PRNewswire/ -- The Corporate Executive Board, a leading research and advisory services firm (NYSE: EXBD) (CEB) today released results from its quarterly Business Barometer survey, which indicated that while businesses continue to project growth, positive economic sentiment has dampened and hiring expectations have dropped by 13 percent points among U.S. executives. Higher energy and core input prices in combination with supply chain risks and softer consumer demand is likely driving much of the decline in confidence.

This is the first time since the inception of CEB's Business Barometer in October 2009 that hiring expectations have declined. Less than half of executives, 45 percent, expect to increase headcount in the next 12 months, down from 58 percent in Q1-2011 and 50 percent in Q4 2010. Expectations among U.S. business executives have taken a more cautious tone overall the past three months. Findings indicate a drop in confidence among executives with a 2.1 decline in the survey's executive sentiment index - from 50.6 in Q1-2011 to 48.5 in Q2-2011.

In line with falling hiring expectations, HR executives reported the least confidence in business conditions among surveyed executives, with a sentiment index of 39.7. In contrast, sales executives, who anticipate increasing sales to both new and existing customers, are among most confident executives, with a sentiment index of 54.6.

"Our latest Business Barometer shows a retreat in confidence among senior executives, who are caught between continued cost pressures on the one hand, and fragile demand on the other," said Michael Griffin, executive director at CEB. "The overall outlook for sales growth, production and business investment, however, remains a net positive, with a majority of executives anticipating top-line growth, expanded production and increasing capital expenditures. Confidence in emerging markets growth also remains strong."

Areas for Vigilance

In response to increased input price volatility, organizations should revisit cost and pricing assumptions underpinning their plans with greater frequency. Volatility in energy and non-energy commodities markets contributed to executive anxiety over increasing cost pressures. Seventy-two percent of executives expect cost pressures to increase, up from 67 percent in Q1 2011. Specifically, 76 percent of executives expect energy prices to rise (up from 66 percent in Q1-2011), while 59 percent believe prices for non-energy commodities will increase in the next 12 months (up from 52 percent in Q1-2011).

Concerns about supply chain disruptions rose following the events in Japan and the Middle East. The percent of executives anticipating higher supply chain risk increased from 38 percent in Q1 2011 to 57 this quarter.

Concerns over weakened consumer demand in developed markets also negatively impacted this quarter's Business Barometer. Forty-four percent of executives said they expect consumer confidence to improve over the next 12 months compared to 56 percent in Q1-2011.

The number of executives expecting growth in new products and capital expenditures (CAPEX) fell by 13 and 17 percentage points respectively. 53 percent of executives expect CAPEX to rise compared with 70 percent in Q1-2011. Additionally, only 41 percent of executives expect greater R&D expenditures in the next 12 months compared to 56 percent in Q1 2011. This is the lowest number recorded since the start of the index in October 2009.

Areas for Optimism

A notable improvement in the Q2 Business Barometer was the expected growth of sales to new and existing customers among sales executives, - 74 percent of sales executives believe sales to new customers will increase in the next 12 months (up from 70 percent in Q4-2010, 63 percent in Q3-2010 and 60 percent in Q2-2010); and 69 percent believe sales to existing customers will be higher (up from 67 percent in Q1-2011 and Q4-2010).

Emerging markets also remain a bright spot for executives. 67 percent of executives expect higher economic growth in emerging markets, down slightly from 70 percent last quarter.

Executive sentiment on growth, while lower than Q1-2011, remains high with 75 percent of senior executives expecting their firms' revenues to increase, down from 82 percent in Q1-2011 and 76 percent in Q4-2010. Additionally, 54 percent of executives who expect higher growth in the next twelve months anticipate meaningful growth of five percent or more. Further, 65 percent of executives expect their industries' revenues to grow in the next 12 months (compared to 69 percent in Q1-2011).

Additional notable findings from the survey include:

    --  Forty-six percent of senior executives expect higher discretionary CAPEX
        on IT, up from 43 percent in Q1-2011.
    --  Fifty-three percent of executives expect more M&A deals (down from 57
        percent in Q1-2011).
    --  Fifty-seven percent expect expanded production levels (down from 69
        percent in Q1-2011),).

CEB's Business Barometer is a forward-looking diffusion index of expected business conditions, condensed from a survey of more than 1,200 senior executives in North America and Europe across 33 industries. The Business Barometer provides a unique measure of business sentiment among a representative sample of CEB's executive member network. The index measures the assumptions of senior executives across six functional disciplines, including HR, corporate finance, operations, sales and marketing, real estate and IT, on the impact 12 key business and economic indicators will have on their business in the year ahead.

For more information on CEB's Business Barometer, visit http://cebviews.com/economic-outlook/

About the Corporate Executive Board

The Corporate Executive Board drives faster, more effective decision making among the world's leading executives and business professionals. As the premier, network-based knowledge resource, The Corporate Executive Board provides customers with the authoritative and timely guidance needed to excel in their roles, take decisive action and improve company performance. Powered by an executive network that spans over 50 countries and represents approximately 85 percent of the world's Fortune 500 companies, The Corporate Executive Board offers unique research insights along with an integrated suite of exclusive tools and resources that enable the world's most successful organizations to deliver superior business outcomes. For more information, visit www.exbd.com.

SOURCE Corporate Executive Board