According to the latest survey, overall business activity rose in September 2007. The CEOs surveyed claimed a higher growth of sales. As a result, corporate profitability in many industries improved as well. Looking ahead, however, the CEOs are less optimistic. They expect slower sales growth over the next six months. Nevertheless, they still believe that profits will grow steadily – hence their plans to increase investment expenditure in the near future.
Overall, Current Sales and Profits Improved. According to the September 2007 survey, the CEOs of Construction, Financial, and Services companies claimed a lower growth of sales. However, almost all other companies claimed a higher growth of sales in the months under survey. As such, overall, sales in the companies surveyed grew at a higher rate than before (the relevant index rose by 6.6% to 131.7). Thus, with stronger sales, the CEOs surveyed claimed better profitability. In particular, our survey reveals that the manufacturing sector recorded good performance in September with profits growing firmly. Overall, across all sectors, the present profits index rose by 2.8% to 113.0.
The Highest and Lowest Rankings. After being ranked first in the previous survey in terms of current profitability, the Transportation & Telecommunications companies are now ranked in third place (see table 1). Meanwhile, the ranking of Financial companies improved to first place in the latest survey from second in the previous survey. Among the poorly performing industries, the ranking of Agriculture companies improved to fifth place from last place in the previous survey. Services companies are now ranked last. Table 1 also shows that the rankings of Construction and Manufacturing companies improved, while the ranking of Trade, Hotels & Restaurant companies fell.
Strong Investment Growth DRI’s business survey shows weaker investment expenditure growth among Construction and Financial companies in the months under survey. However, in contrast, the CEOs of Services companies claimed a steady growth in their
investment expenditures. Thus, as CEOs of other companies claimed higher investment expenditures, overall investment expenditure grew at a higher rate than before (the relevant index rose by 6.3% to 125.0). Compared to one year previously (September 2006), the present investment index is up by 18.3%, suggesting that investment conditions have improved significantly.
CEOs are Less Optimistic. Looking forward, CEOs are less upbeat. They predict sales to grow at a slower pace over the next six months. However, as they also expect to see the cost of goods sold grow at a lower rate, the CEOs still believe that profits will grow steadily (the relevant index only fell by 0.6% to 140.0). Furthermore, our survey also shows that the CEOs surveyed plan to increase their investment expenditure over the next six months (the relevant index rose by 3.9% to 138.7). And compared to one year previously (September 2006), the expected investment index is up significantly (by 18.1%), showing much greater enthusiasm to undertake investment activities. BusinessOutlook November 2007