The Chief Executives’ Confidence Measure, which had edged up to 57 in the first quarter of 2006, declined to 50 in the second quarter, The Conference Board reported today in its latest survey of CEOs.
The survey includes about 100 business leaders in a wide range of industries. A reading of more than 50 points reflects more positive than negative responses.
“CEOs’ confidence has waned in the second quarter and expectations signal slower economic growth in the coming months,” said Lynn Franco, director of The Conference Board Consumer Research Center. “However, the majority of CEOs do not foresee slower growth having an adverse impact on corporate profits.”
CEOs’ assessment of current conditions decreased significantly, as only 27 percent of CEOs claim current economic conditions are better, down from 49 percent in the first quarter. In assessing their own industries, business leaders were not as negative, but were less buoyant than last quarter. About 40 percent say conditions are better, down from 52 percent last quarter.
CEOs are more pessimistic about the short-term outlook than they were in the first quarter of 2006, with only 21 percent of business leaders expecting economic conditions to improve in the coming months, down from 35 percent last quarter. Expectations for their own industries were also less optimistic, with about 31 percent anticipating an improvement, down from 35 percent last quarter.
On the issue of profit expectations over the next 12 months, 75 percent of executives anticipate increases. However, there are some marginal differences by category of business. Those engaged in the non-durable goods industry are the most optimistic, with 80 percent expecting profits to increase. Executives in the durable goods industry are a very close second, with 79 percent anticipating a rise in profits. However, only 66 percent of CEOs in the service industry expect profits to increase.
Among chief executive officers who expect profits to increase, 52 percent cite an increase in market/demand growth as the main source of improvement, 26 percent cite cost reductions, 16 percent cite price increases, and the remaining 6 percent believe technology will drive profits up.