CEO confidence across upstate New York in 2016 was up 9 points compared to 2015 and is at the “second highest rate” of the 10-year study.
That’s according to the Upstate New York Business Leader Survey that the Siena (College) Research Institute (SRI) conducted in late 2016.
At 103.8, the overall index is up from 94.8 last year and over the breakeven point of 100, but still below the record of 110.4 recorded two years ago, according to the SRI data.
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This year’s confidence level represents “only the second time” in which the Upstate New York Business Leader Index has surpassed the 100-point mark.
The overall-confidence index of 103.8 is a combination of the current-confidence and future-confidence components.
The CEOs’ current-confidence index of 94.8 is up slightly from 92.1 last year but below the breakeven point and the 2014 high of 106.9.
Their future-confidence index of 112.7 is up over 15 points from 97.5 last year and nearly equal to the record high of 113.9 in 2014.
What’s driving the index, “interestingly,” is an “increasing hopefulness” for the New York state economy, says Donald Levy, SRI director.
“We’re not seeing CEOs telling us, by and large, that they’re already doing better than they were a year ago, but rather what they’re telling us is that they have heightened expectations for next year and that really what seems to be pulling the index up,” says Levy. He spoke to CNYBJ on Jan. 24.
In analyzing each of the four questions that comprise the index — the current assessments 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 — SRI found “growing optimism” about the future compared to last year while current assessments this year are virtually the same as last year.
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 33 percent of CEOs are optimistic (up from 29 percent last year). It found 49 percent (up from 47 percent) are ‘status quo,’ that is they feel as though conditions have stabilized and are likely to remain so, and 19 percent (down from 24 percent) are pessimistic.
A growing number of CEOs, 42 percent, expect the economy of New York state to improve in 2017. Only 22 percent anticipate worsening.
The Business Council of New York State, Inc. sponsored the survey, which SRI researchers conducted between October and December 2016.
“While we are happy to see that as a group upstate CEOs are more confident than last year, it is clear that more work needs to be done, particularly in Syracuse.
Business owners are clamoring for economic freedom and remain deeply pessimistic that government, especially state government, is prepared to relieve that burden. The Business Council, through our 2017 “Back to Business” agenda, stands ready to fight for the regulatory and legislative changes necessary to get the state’s economy moving and bring real optimism back to Central New York,” Heather Briccetti, president and CEO of the Business Council of New York State, Inc., said in a statement emailed to CNYBJ on Jan. 24. (For more information on the Business Council’s 2017 agenda, see story on p. 1B.)
SRI interviewed 440 CEOs of private, for-profit companies in the Capital Region (32 percent), Buffalo (27 percent), Rochester (22 percent), and Syracuse (16 percent) from industries that included service (32 percent), manufacturing (18 percent), engineering and construction (18 percent), retail (11 percent), wholesale and distribution (10 percent) and smaller samples from both the financial and food/beverage sectors.
CEO confidence
CEOs in Syracuse recorded the third-highest overall, current, and future confidence of the four regions in this survey, with two of their measures (overall and future) registering above 100, indicating more optimism than pessimism.
Overall confidence in Syracuse is at 101.4 up 9.6 points from 91.8 last year.
Current confidence in Syracuse is 87.5, down from 91.1 last year. Future confidence increased to 115.3, up 22.9 points from 92.4 a year ago.
“[We see] a dramatic increase in the percentage that are saying … I think it’s going to be a good year,” says Levy.
The survey found 57 percent of Syracuse’s CEOs indicating that the general-business climate locally is staying about the same, but 13 percent say that conditions are improving and 28 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, 32 percent (up from 30 percent) of Syracuse’s CEOs are optimistic; 54 percent (46 percent last year) are ‘status quo;’ and 14 percent (down from 24 percent) are pessimistic.
“Clearly, the lingering negativity, the lingering pessimism is lessening among Syracuse CEOs,” says Levy.
The overall upstate numbers are 33 percent optimistic, 49 percent ‘status quo,’ and 19 percent pessimistic.
The change in the relative size of the optimistic group is demonstrative of an increase in confidence and associated increasing projections for revenue, profits, and hiring.
CEOs from Syracuse are optimistic and expect increasing revenue and profit in 2017.
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 113.1, down from 121.3 last year.
That’s followed by manufacturing at 107.7, which is up “strongly” from 90.9; service at 105.1, is up “strongly” from 89.6; wholesale/distribution at 92.3, up from 87.9; and retail at 91.5, up from 89.2.
Engineering/construction remains the industry with the highest confidence and is joined by service with each measure — current, future, and overall — reading above 100, an indication that there is more optimism than pessimism.
The overall index is drawn upward by the “significantly” higher future index, compared to the current score in each of the major industry categories.
CEO assessment of the local market
The survey found 13 percent of Syracuse’s CEOs indicating that the general business climate in their local area is improving while 57 percent say it is staying the same and 28 percent say it is worsening.
And when considering the local conditions for their industry across all of Upstate, only 11 percent see improvement while 25 percent sense worsening. Those findings are “slightly better” than last year when 8 percent of Syracuse CEOs saw improvement for their industry and 38 percent foresaw worsening.
SRI also asked the CEOs to assess their local area on eight aspects, including 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, and airline service and taxi/car service.
Across Upstate, a majority of the responding executives rank only one area positively (excellent or good) — “a place where consumers want to live” at 55 percent.
CEOs are “evenly divided” between positive and negative assessments of their local area on airline service and workforce suitability, and slightly more negative than positive on consumer confidence and transportation infrastructure.
Large majorities assess governmental support (78 percent), as an area where businesses can succeed (69 percent), and taxi/car service (78 percent) as only fair or poor.
Syracuse CEOs’ assessment of the Syracuse area is “dissimilar” to the CEOs’ assessment of other areas.
A majority offers fair or poor marks for each of the eight aspects of the local market.
“The suitability of the workforce gets tougher grades in Syracuse than it does Upstate, so you’ve got a situation where 60 percent … of CEOs are saying the suitability of the workforce is no better than fair or poor in the Syracuse area,” says Levy.
He also notes that one-third of the Syracuse CEOs are saying they plan to hire in 2017.
Overall, CEOs grade taxi/car service, local government support, and businesses ability to succeed “most harshly.”
CEO plans for 2017
Across Upstate, Siena sees positive signs that point to growth in sales, profit, business-to-business commerce, and hiring this year.
The survey found 39 percent of CEOs across Upstate plan to increase their workforce in the coming year, up from 33 percent last year and the highest rate that the survey has indicated in 10 years. Only 8 percent are planning to downsize, virtually the same amount indicated as last year.
In Syracuse, 33 percent plan to increase their workforce, representing the “highest number we’ve ever had among Syracuse CEOs” on that question, according to Levy. The figure is up from 27 percent last year, while only 6 percent anticipate layoffs.
“That number was down as low as 18 percent in the depths of the recession,” Levy added, referencing the 2009 survey, which SRI released in early 2010.
Optimistic CEOs plan to hire versus downsize at a ratio of 57:2 (last year 48:3) while pessimistic CEOs ratio is 24:27 (last year 16:21).
Engineering/construction CEOs have the “most aggressive” plans to add to their workforce at 57 percent, while service (41 percent), manufacturing (37 percent) and retail (34 percent) all plan to moderately increase their workforce.
Of note, while the overall ratio of hiring to layoffs is just under 5:1 and not quite equal to the pre-recession (2007) ratio of 6:1, it is an improvement from the 1:1 ratio of 2008 and the best we have seen since 2007 as well as having reached an absolute number of 39 percent that is a record for this study.
The survey also found 51 percent of upstate CEOs expect their revenues to increase in 2017, up from 45 percent a year ago.
In Syracuse, 47 percent anticipate increasing revenue, up from 44 percent a year ago.
Two-thirds of upstate manufacturing CEOs anticipate increasing revenues.
The findings also indicate 43 percent expect profits to grow this year up from 35 percent a year ago.
Profit growth projections are similar in Syracuse where 39 percent expect increasing profits while 21 percent anticipate declines. The percent anticipating growing profits are up from last year’s expectations of 30 percent increasing.
Of the major industry sectors, manufacturing anticipates the greatest increase in profits at 57 percent, expecting a more profitable year but engineering and construction, at 48 percent, also anticipate a strong 2017.
A plurality of CEOs again this year 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.
Still SRI’s findings also indicate a “decided widening of the gap” between those that plan to focus on generating demand for their product or service at 48 percent, up from 39 percent, compared to those that will engage in cost reductions, 25 percent down from 31 percent.
“Clearly,” more CEOs are working on growth and development rather than cutting costs, SRI said.
The optimistic cluster of CEOs is “overwhelmingly” planning growth while the most pessimistic are more inclined to stress cost reductions.
Still, more pessimistic CEOs are now working on growing their business (37 percent) more so than on cost reductions (34 percent).
Just over half of all CEOs (51 percent, down four points from last year) plan to acquire fixed assets. In Syracuse, 46 percent plan to acquire fixed assets.
Manufacturing CEOs (71 percent) and engineering/construction CEOs (62 percent) are “most likely” to invest in fixed assets this year, per the SRI data.