CEO confidence across upstate New York in 2013 recovered from a “significant” drop in 2012 and increased over the previous year for the first time since 2010.

That’s according to the new Upstate New York Business Leader Survey that the Siena (College) Research Institute (SRI) has issued in partnership with The Central New York Business Journal and other upstate publications.

Still, based on the Index of Business Leader Confidence, this year’s overall reading of 94.6 stands just below the breakeven point of 100, at which overall optimism and pessimism are balanced, according to SRI.

At 94.6, the overall index is up from 88.9 in 2012, but below 97.9 in 2011 and 98.4 in 2010, according to the SRI data.

The overall-confidence index of 94.6 is a combination of the current-confidence and future-confidence components. The CEOs current-confidence index of 93 is up from 82.9 last year and virtually equal to the 92.8 index level in 2011 and 93.8 index level in 2010.

Their future-confidence index of 96.2 is up “slightly” from 94.8 last year and down from 103 in 2011 and 103.1 in 2010, SRI said.

 

Syracuse–area CEO confidence

Chief executives in the Syracuse region recorded the second highest score in overall confidence of the four Upstate regions this year at 97.4, up from 89.0 a year ago.

“We see a healthy increase in overall confidence when we look at the index. But when you look slightly deeper, where that increase is coming from is the current [component], not the future [component],” says Donald Levy, SRI Director.

Current confidence in Syracuse rose to 98.3 from 81.4, while future confidence remained the same at 96.6.

Year to year, the survey found a 17 point increase in the current [component] but the future [component] is “utterly flat,” Levy says.

It seems to indicate that Syracuse business leaders feel better about their recent past and their present day situation more so than a year ago.

“Things have solidified as a whole, but [Syracuse CEOs are believing] I’m no more optimistic about the future today than I was a year ago in spite of the fact that my present is better,” Levy says.

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

Of the five largest industry sectors, confidence is greatest this year in engineering and construction at 113.6, which is up from 86.3 last year. The retail sector followed at 95.0, which is up from 80.7; manufacturing at 91.4, up from 82.6; service at 89.0, up from 86.9; and wholesale and distributing at 82.7, down from 88.6, according to the SRI data.

Each of the four questions that comprise the index — including the current assessment of the state’s economy and its impact on a CEO’s industry and their view of the future of the state’s economy as well as their industry prospects — are improved from last year but, in each case, collectively slightly more pessimistic than optimistic, SRI said.

Using SRI’s statistical clustering of CEOs, based on simultaneously considering their views, both current and future, toward the overall state economy and their industry’s current and future prospects, SRI found that 31 percent of CEOs are optimistic. That’s up from 26 percent last year. Meanwhile, 45 percent are ‘status quo,’ meaning they believe conditions have stabilized and are likely to remain so.

The 45 percent figure is up from 42 percent last year. SRI also found that 24 percent are pessimistic, which is down from 32 percent.

Using SRI’s cluster grouping of CEOs that simultaneously considers their answers to all four index questions, 34 percent of Syracuse-area CEOs are optimistic, 43 percent are ‘status quo’ and 23 percent are pessimistic.

Local leaders such as Eric Krouse, CEO of Syracuse–based Pinnacle Investments, LLC, are among those who say they’re “optimistic” about the upstate New York economy.

“There’s a lot of good, solid grassroots kinds of projects going on,” Krouse says.

He referred to the plans for a 130-room hotel in Syracuse’s Inner Harbor, which Gov. Andrew Cuomo announced during a visit to the site on Oct. 3.

New York state appears to be promoting itself as a place for business, says Paul Nagle, president of Nagle Athletic Surfaces of Clay.

“I just think the overall climate [compared to] three years ago is greatly improved,” he says.

 

Thoughts on locating here

Across upstate New York, only 29 percent of CEOs (including 32 percent in Syracuse) say that if they had it to do all over again considering all factors, that they would locate their business in New York.

While CEOs in the most optimistic cluster are evenly divided on this question, those in the most pessimistic cluster overwhelmingly say that they wish they had started their business someplace else.

When asked to name the one industry sector that will have the most positive economic impact locally, across Upstate CEOs named both medical and technology at rates of 29 to 26 percent, SRI said.

But, in Syracuse, medical was named by 25 percent of respondents, followed by manufacturing at 18 percent.

 

CEO assessment of the local market

The survey found 15 percent of Upstate CEOs believe the general-business climate in their local area is improving while 55 percent say it is staying the same, and 28 percent say it is worsening.

In Syracuse, fewer (8 percent) say it is improving while 39 percent say the general business climate is worsening.

“I see it improving,” says Pinnacle Investment’s Krouse, noting a lot of entrepreneurs a pursuing startup companies and growing those businesses.

When asked to consider the local workforce, Syracuse CEOs are “less inclined” to say the market has an “ample supply” of local workers appropriately trained for their employment needs than the CEOs in the rest of Upstate.

“The Syracuse number is the lowest of the four regions in terms of the percentage of business leaders who say there’s an ample supply of appropriately trained workers,” Levy says.

The survey found 42 percent of Syracuse CEOs believe the local market has an “ample supply” of trained workers while 53 percent of the CEOs from the balance of Upstate believe their area has appropriately trained workers.

When asked to name the one industry sector that will have the most positive economic impact on their local market, Upstate CEOs name both medical and technology at rates between 29 and 26 percent. However, in the Syracuse region, 25 percent of CEOs see the medical sector as having the most positive impact. The manufacturing sector followed at 18 percent, according to the SRI data.

 

CEO plans for 2014

The survey indicates signs that point to overall growth in sales, profits, and business-to-business commerce and hiring, SRI said. The participating business executives don’t see a “statewide boom,” but rather “slow and cautious” growth.

About 42 percent of Upstate’s CEOs expect their revenues to increase in 2014, which is up from 38 percent a year ago.

In Syracuse, for example, 43 percent anticipate increasing revenues, up from 38 percent a year ago.

“We expect our revenues to increase just because the word’s getting out there about us and in our particular industry, the big firms are pushing clients away, so we’re a good home for them,” says Pinnacle’s Krouse.

And over half of the participating manufacturing CEOs, or 52 percent, anticipate increasing revenues, the survey found.

It also found 31 percent expect profits to grow this year, which is virtually unchanged from 30 percent a year ago.

SRI also noted that even though expectations for profit growth are unchanged across Upstate, the survey found fewer CEOs, or 30 percent, anticipate declining profits this year, down from 39 percent a year ago.

In the Syracuse region, profit-growth projections are similar. The survey found 36 percent of CEOs expect increasing profits while 32 percent anticipate declines. Those figures represent an improvement from last year’s results when 27 percent had expectations of increasing profits and 38 percent were bracing for a decline, according to SRI.

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

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

The optimistic cluster of CEOs is “overwhelmingly” planning growth while the most pessimistic are inclined to stress cost reductions.

Over half of all CEOs, 52 percent, once again this year plan to acquire fixed assets, including 57 percent of CEOs in the Syracuse region.

The survey also found 28 percent of Upstate CEOs plan to increase their workforce in the coming year, little changed from 27 percent last year.

Only 12 percent are planning to downsize, a small reduction from 15 percent last year.

In Syracuse, 26 percent plan to increase their workforce while only 10 percent anticipate layoffs both improved slightly from last year.

Nagle Athletic Surfaces would to like to add about five more employees to its workforce of 30, which is a combination of year-round and seasonal employees. But that’s also contingent on its projected growth in revenue.

“We’re hoping that our sales grow by about 10 percent,” Nagle says.

 

CEO obstacles and challenges

Upstate CEOs, including those in Syracuse, list health-care costs, governmental regulations, and taxes as the top three challenges they’re facing.

Given the importance of both the federal and New York state government, in addressing many of the chief concerns that CEOs express, it is “noteworthy” that CEOs have little confidence in government’s current efforts to produce a business-friendly climate or in its likelihood to improve conditions, the survey found.

When asked about the federal health-care reform law, 69 percent overall and 61 percent in Syracuse, say they expect it to have a “negative” impact on their business.

Health care is an “enormous” problem weighing on these business leaders, says Levy. They think it’s going to have a “negative impact” on their businesses, he adds.

“Meaningful minorities are starting to take steps that include hiring more part-time people, cutting back on hours, decreasing benefits, going to a defined-contribution [plan] instead of a full percentage of coverage kind of plan,” Levy says.

The survey found 32 percent have already decreased benefits in order to cut costs; 28 percent have begun to offer defined-contribution health insurance; 24 percent have begun to hire more part-time employees; and 18 percent have reduced the number of hours current employees work.

The Siena College Research Institute (SRI) conducted the 7th annual Upstate New York Business Leader Survey between Oct. 21 and Dec. 31, 2013.

SRI interviewed 651 CEOs, which is up from 592 last year.

Of that figure, 14 percent lead firms in Syracuse; 30 percent in the Buffalo area; 24 percent in the Capital Region; and 29 percent lead firms in the Rochester area.

The breakdown of CEOs interviewed by industry include service (27 percent), manufacturing (19 percent), engineering and construction (17 percent), wholesale and distribution (15 percent), and smaller samples from both the financial and food and beverage sectors, SRI said.

 

Contact Reinhardt at ereinhardt@cnybj.com