Top-level executives have turned more confident about the the US economy, the Conference Board reports. The board's measure of business confidence rose to 61 (on a scale of 1 to 100 ) in the second quarter, up three points over the first quarter. The current figure is 32 points above the record low of one year ago.
The confidence measure is based on the views of about 1,500 chief executive officers across the country. These executives represent businesses of all types and sizes.
The executives' assessments of current conditions moved up in the second quarter, after easing in the first, while there was little change in their assessments of the outlook. The score for current economic conditions rose to 57, from 50 in the first quarter, and the rating for current conditions in the executives' own industries rose to 51 from 48. Expectations for the economy registered 64, up from 63, while expectations for conditions in the executives' own industries held at 61.
The last three quarterly readings for the confidence index have been around 60. "This is quite a strong response," notes Lora S. Collins, director of business conditions analysis at the Conference Board. "It indicates an average sentiment lying between 'conditions unchanged' and 'conditions moderately better.' In the five-year history of the survey, scores in the 75 vicinity -- indicating an average sentiment of 'moderately better' -- were recorded only during the rebound from the deep 1974-75 recession."
The latest survey asked chief executives if enactment of President Reagan's tax depreciation proposals, retroactive to early 1981, would cause revisions in their capital spending this year and next.
While tax changes would be expected to have a long-run effect, the vast majority of those polled (72 percent) said that the proposed tax changes would not cause them to revise their 1981-82 investment programs. About 18 percent said the tax changes would cause increases in these programs of 10 percent or less; only 10 percent said their spending would be revised upward by more than 10 percent.Among the reasons for the relatively low proportion of firms planning immediate revisions in their capital spending programs: (1) capital investments generally have long lead times and outlays are unlikely to respond to tax changes very quickly; (2) tax changes do not directly affect the end- product markets that are a central factor in companies' capital investment decisions. In addition, many executives cited high interest rates as a barrier to increased capital investment. A typical observation: "As long as interest rates remain in the present range, we do not expect any capital investmen ts to be made that can be delayed."