From Recovery to Expansion

The results of latest quarter’s YPO GlobalPulse survey of economic sentiment were released to the public last week and CEO confidence in the U.S. rose in the fourth quarter to its highest level since YPO began measuring CEO sentiment in July 2009. Globally, confidence either rose or remained high in every region. The U.S., European Union and Australasia regions were the only three regions below the average, and the E.U,’s score the was the lowest among all regions with Greece, Ireland, Spain and Portugal weighing on the region’s score. Asia, the Middle East and North Africa (MENA) region, and Latin America were the most optimistic regions.

CEO confidence in the U.S. was elevated by rising expectations about sales, hiring and capital spending.
All three of the graphs to the right reflect a dip in confidence in the second quarter and modest increases thereafter, but it’s important to note that in the first survey done in July of ’09 all three of these were at or below 50, and in the January 2010 results they were all at least 3 points below the April 2010 results. So when you look further back you see a long steady climb with a hiccup in the second quarter of 2010 that appears to be solidly in the rear view mirror now. The fact that the market’s reaction to the Egypt crisis was limited to a single day provides some anecdotal evidence that we’ll continue to see this progression in sentiment in the next set of results and the “ripples” I discussed in last quarter’s post have flattened out in a healthy way.

Stephen Slifer, Chief Economist of Numbernomics, former Chief U.S. Economist for Lehman Brothers in New York City from 1980 until his retirement in 2003, and former senior economist at the Board of Governors of the Federal Reserve in Washington, D.C. presented his view of the state of the economy today on a conference call to discuss the GlobalPulse results.


Mr. Slifer’s statistics supported the rise in CEO sentiment and he expects GDP growth of 4.3% in 2011, inflation at 1.7%, the unemployment rate getting down to 8.4% and the Fed funds rate ending the year at a mere 0.13% as the Fed waits for substantial improvement in the employment picture before making any significant adjustments. Consumers have reduced their debt and employment is picking up (although there is a still some slack in hiring to work through because of the increases in productivity we continue to see) which will unleash the consumer to start spending.


Cash sitting in corporate coffers is at unprecedented levels and needs to be put to work, and likely will as confidence in the economy increases. According to Mr. Slifer, “Once the Fed starts to tighten they will need to go a long way. If the Fed wants GDP growth of 3.0% and inflation of 2.0% , then a neutral funds rate would be about 5.0% and it will take the Fed about two years to get there,” supporting his belief that the chances of another recession prior to 2015 at the earliest are extremely remote.

Visit to see a host of other slides that paint a complete picture of Stephen’s Slifer’s view, and for more GlobalPulse Results.


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