The quarterly report called the Measure of CEO Confidence, improved in the fourth quarter of 2012 after dipping in the third quarter. It rose to 46, up four points from a reading of 42 in the third quarter. Our note of caution here is that it takes a reading above 50 to reflect more positive than negative responses.
We also saw some improvement in the employment picture in December. The Conference Board Employment Trends Index rose to 109.02 in December versus 108.19 in November, and that is actually 3.1% higher than a year ago.
Lynn Franco, Director of Economic Indicators at The Conference Board, said about the CEO index, “CEO Confidence improved in the final quarter of 2012, despite the cloud of fiscal uncertainty. However, CEO sentiment remains pessimistic by historical standards. Regarding inflation expectations for 2013, CEOs expect moderate price increases.”
Gad Levanon, Director of Macroeconomic Research at The Conference Board, said, “After posting a significant increase in December, following an upward revision in November, the Employment Trends Index is improving. However, if economic activity continues to expand slowly in the first half of 2013, it would be difficult for employers to maintain the current rate of job growth.”
One report is more positive than the other, but what we cannot help but wonder is how much better the employment picture might become if more uncertainty is removed from the business climate. With the fiscal cliff looking to be mostly behind us, the major hurdle has been removed even if the compromise was not exactly an impressive compromise. CEOs will likely be more confident in the first quarter than they were in the fourth quarter now that Washington is passing out less uncertainty than it was in December.
Neither one of these Conference Board reports are as important to the markets as the formal Employment Situation brought by the Labor Department. The reason that these combined reports matter is because they may offer better insight ahead now that some uncertainty has been removed.