2015 Economic Outlook

Thursday, January 15, 2015
Jim Herbert

Jim Herbert

Herbert Research

At the end of 2014, the Business Confidence Index for all four quarters resulted in an average of 61.5 out of a total of 100.

Jim Hebert, President of Hebert Research, presented his findings at the CEOtoCEO breakfast on January 29th and explained that "anytime the [Business Confidence Index] is above 50, the economy is expanding." Almost half of the respondents (48.6%) reported an overall confidence level of 7 or higher in the economy and only 8.5% reported a low level of confidence in the economy (rating of 0-3).

To summarize the general idea, businesses are not fearful of the economy and are confident in it. Hebert Research then asked respondents to predict the percentage change in their business's total revenue over the next 12 months.

Out of the combined total of businesses surveyed in 2014, those who expected to see a 1% to 10% increase in total revenue averaged at 47.9%. Only 5.2% of respondents predicted that their revenues would decrease in the next 12 months. Essentially, this shows that business do not have a large concern with revenues decreasing.

Hebert then presented the findings on the forecasted change in total costs. For 2014, businesses reported a mean expected increase of 8.4% in total costs. Although they expect an increase in total costs, businesses anticipate their prices and fees to only increase slightly (3.23%). Hebert explained that costs are going up because, "the economy is becoming more commoditized in differentiation which result in higher fees and margins."

He further elaborates in his presentation "prices and fees are remaining very competitive because of the competitions within the market." Hebert puts emphasis on the notion that price control is critical for businesses.

In the forecasted change of total capital expenditures, the mean expectation businesses had during the year of 2014 was a 4.15% increase. Over the course of the year, 36% of respondents expected an increase of 1% to 10% in total capital expenditures while 9.7% expected a decrease. Hebert explains during his presentation that there are modest rates of inflation and there are not many concerns on deflations.

Hebert has a "reserved optimism" for the economy because of the "national deficit, consumer debt, and the world economy." He goes on to say that, "otherwise we would see that our economy based on the consumer and business confidence would be stronger and should provide a basis for a strong 2015 economic performance."

Hebert closes his presentation by concluding that good economic policy should be fair, just, and right, concluding that, "we have to strive on getting it right in terms of our business."

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