Chief executives’ confidence fell to its lowest level in four years, The Conference Board reports today in its latest survey of CEOs.
The Conference Board’s Measure of CEO Confidence, which had fallen to 55 in the second quarter of 2005, slid to 50 in the third quarter (a reading of more than 50 points reflects more positive than negative responses). This is the lowest reading in nearly four years when the Measure registered 40 in the final quarter of 2001. The survey includes about 100 business leaders in a wide range of industries. (Survey results were received prior to and after Hurricane Katrina).
“CEOs’ confidence was already waning in the face of rising energy costs, and Hurricane Katrina has further exacerbated this situation,” said Lynn Franco, director of The Conference Board Consumer Research Center. “Confidence has fallen to a 4-year low and will likely remain subdued for the rest of 2005.”
CEOs’ assessment of current conditions continued to deteriorate. Now, close to 32 percent of CEOs say current economic conditions are worse, up from about 19 percent in the second quarter. In assessing their own industries, business leaders’ assessment remained virtually unchanged. Slightly more than 29 percent say conditions are worse, compared with 30 percent last quarter.
CEOs are noticeably less optimistic about the short-term outlook than they were earlier this year. Now, 32 percent of business leaders expect economic conditions to worsen in the next six months, up from 19 percent last quarter. Expectations for their own industries were also less positive, with nearly 38 percent anticipating a deterioration, compared with 25 percent last quarter.
Some 34 percent of business executives report increases in their companies’ capital spending plans since January of this year, while only 12 percent have scaled back plans. This is a moderate change from the 2004 survey, when 33 percent had increased their capital spending plans and 6 percent had made cuts. Among the reasons given for increasing capital investment plans, the most common was an increase in sales volume. A decrease in sales volume was the most cited reason for a decrease in spending plans.
The Conference Board’s quarterly measure of CEO confidence covers nearly 100 CEOs in a wide variety of industries.
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