Upstate New York Business Leader Survey finds confidence fell in 2015

CEO confidence across upstate New York in 2015 declined about 15 points compared to 2014 but was on par with 2013.

That’s according to the Upstate New York Business Leader Survey that the Siena (College) Research Institute (SRI) released Jan. 22.

At 94.8, the overall index is down from 110.4 last year and nearly identical to 94.6 in 2013.

The overall-confidence index of 94.8 is a combination of the current-confidence and future-confidence components. 

The CEO current-confidence index fell sharply to 92.1 last year from 106.9 in 2014, but was close to the reading of 93 in 2013. 

The future-confidence index of 97.5 in 2015 is down from 113.9 in 2014, but slightly higher than 96.2 in 2013, SRI said.

“It is striking that across Upstate in general … that we see confidence down, expectations for the coming year down relative to last year,” says Donald Levy, director of the Siena Research Institute. Levy spoke with CNYBJ on Jan. 26.

Levy believes the responding CEOs are saying that 2015 didn’t live up to “what their hopes were.”

The four questions that comprise the index query CEOs on their current assessment of the state’s economy, its impact on CEOs’ industry, their view of the future of the state’s economy, and their industry prospects.

Both industry assessments display slightly more pessimism than optimism while CEOs view of statewide conditions are lower, but views on future conditions are now at a breakeven point.

Using SRI’s statistical clustering of CEOs, based on simultaneously considering their current and future views toward the overall state economy and their industry’s current and future prospects, SRI found that 29 percent of CEOs are optimistic (down from 39 percent last year); 47 percent (up from 44 percent) are ‘status quo,’ meaning that they feel as though conditions have stabilized and are likely to remain so; and 24 percent (up from 16 percent) are pessimistic.

The Business Council of New York State, Inc. sponsored the survey, which SRI researchers conducted between October and December 2015.

Heather Briccetti, president and CEO of the Business Council, called the drop in upstate CEO confidence during 2015 “disheartening” in an email to CNYBJ.

But the organization was “happy” about how much the business leaders’ priorities “aligned” with its own legislative agenda.

“As this survey so succinctly lays out, there are several significant and necessary regulatory reforms that would go a long way to improving our state’s economy. Whether it’s eliminating the Scaffold Law, or reducing workers’ comp and [unemployment insurance] costs, upstate New York CEOs and the Business Council are in lockstep about what state lawmakers should be focusing on,” Briccetti said.

SRI interviewed 531 CEOs of private, for-profit companies in Rochester (29 percent), Buffalo (28 percent), the Capital Region (27 percent), and Syracuse (15 percent). They hail from industries, including service (25 percent), manufacturing (24 percent), engineering and construction (16 percent), retail (12 percent), wholesale and distribution (11 percent) and smaller samples from both the financial and food/beverage industries.

Syracuse results
CEOs in Syracuse recorded the second-largest declines in overall and current confidence and the largest drop in future confidence among the four regions this year, with each of their measures registering below 100 — indicating more pessimism than optimism. 

Overall confidence in Syracuse plunged to 91.8 in 2015 from 109.9 last year.

Current confidence in Syracuse is 91.1, down from 102.6 in 2014. Future confidence plummeted 24.7 points from 117.1 to 92.4, according to SRI.

The survey found that 48 percent of Syracuse CEOs say that the general business climate locally is staying about the same, 8 percent say that conditions are improving, and 43 percent — the highest of the four regions — think they are worsening.

However, using SRI’s cluster grouping of CEOs that simultaneously considers their answers to all four index questions, 30 percent (down from 37 percent) of Syracuse’s CEOs are optimistic, 46 percent (off from 50 percent last year) are ‘status quo,’ and 24 percent (up from 13 percent a year ago) are pessimistic. 

Levy says he interprets the figures as Syracuse CEOs saying, “We will continue to do business. We’re not panicked, but we simply don’t think things are improving. And we really don’t anticipate that strong of a year.”

The overall upstate numbers are 29 percent optimistic, 47 percent ‘status quo,’ and 24 percent pessimistic. 

The change in the relative size of the optimistic and pessimistic groups signals a decrease in confidence and associated decreasing projections for revenue, profits, asset acquisition, and hiring, SRI said.

The SRI Business Leader Survey also breaks down the confidence data among industry sectors.

Of the five largest industry sectors, confidence is greatest again this year in engineering/construction at 121.3 (down from 124.7 last year).

That’s followed by manufacturing at 90.9 (down from 105.2), service at 89.6 (down from 116.3), retail at 89.2 (down from 103.8), and wholesale/distribution at 87.9 (down from 102.5). 

The engineering/construction sector remains the industry with the highest confidence measure with every reading above 100, an indication of more optimism than pessimism.

Pessimism in CNY
The survey found 8 percent of Syracuse–area CEOs say that the general business climate in their local area is improving, while 48 percent say it is staying the same and 43 percent say it’s worsening.

“I would say the Central New York CEOs stand out a little bit in terms of having a more negative assessment of local conditions,” says Levy.

The 8 percent who believe the area is improving is down from 11 percent last year and below the other three regions’ combined rate of 23 percent, SRI said.

And when considering the local conditions for their industry across all of Upstate, only 14 percent see improvement, while 29 percent sense conditions are worsening. It represents a decline over last year but SRI contends CEOs issue a “harsher” assessment of the business climate when considering their own industry than when addressing the overall economy.

Slightly fewer Syracuse CEOs express the same optimism as the upstate sample with 8 percent saying local conditions for their industry are improving. Another 38 percent believe that conditions are deteriorating, which is greater than the upstate sample, according to SRI.

Asked to assess their local area on eight aspects: suitable workforce, consumer confidence, transportation infrastructure, local government support for business, as an area where businesses can succeed, as a place where consumers want to live, airline service and taxi/car service, across upstate a majority rank only three: workforce suitability, as a place to live, and airline service as either excellent or good. 

Majorities assess governmental support (79 percent), as an area where businesses can succeed (68 percent), taxi/car service (64 percent), consumer confidence (58 percent), and transportation infrastructure (55 percent) as only fair or poor.

Syracuse CEOs’ assessment of their area is lower than that of the CEOs assessment of other areas. They offer lower marks for all areas, except assessment of the area’s workforce, as compared to the upstate-wide sample.

CEO plans for 2016
SRI sees “positive signs” across Upstate that point to some growth in sales, profits, business-to-business commerce and hiring in 2016. 

CEOs do not see any statewide boom but rather “slow, cautious growth.”

The survey found 45 percent of Upstate’s CEOs expect their revenues to increase in 2016, down from 49 percent a year ago.

In Syracuse, 44 percent anticipate increasing revenues, down from 50 percent a year ago. At the same time, 55 percent of manufacturing CEOs also anticipate increasing revenues.

In addition, 35 percent of Upstate CEOs expect profits to grow this year, off from 41 percent a year ago.

Profit-growth projections are lower in Syracuse where 30 percent expect increasing profits, while 39 percent anticipate declines. The numbers are down from last year’s expectations of 45 percent increasing and 20 percent bracing for decline, SRI said.

Of the major industry sectors, manufacturers anticipate the greatest increase in profits.

Again this year, a plurality of CEOs plan to enhance profitability more so with increasing their market share or demand for their product or services as compared with those advocating cost reductions.

Well over half of all CEOs, 55 percent, plan to acquire fixed assets, down 3 points from last year.

In Syracuse, 53 percent plan to acquire fixed assets, including 63 percent of manufacturing CEOs who are most likely to invest in fixed assets this year.

“To me, that’s a continuing indication that as … lackluster as they are in their opinion of the marketplace, they’re continuing to do business. They’re continuing to make improvements to their business, whether it be trucks, computers,” says Levy.

The survey also found 33 percent of CEOs across Upstate plan to increase their workforce in the coming year, virtually unchanged from 32 percent last year. Only 9 percent are planning to downsize, the same amount indicated as last year.

In Syracuse, 27 percent plan to increase their workforce, down from 31 percent last year, while 15 percent anticipate layoffs.

“That’s a … weaker number,” says Levy.

Optimistic CEOs plan to hire versus downsize at a ratio of 48:3, while the pessimistic CEOs ratio is 16:21.

Engineering and manufacturing CEOs have the most aggressive hiring plans at 47 and 38 percent, respectively.