A key indicator that measures chief executives’ confidence in the economy fell in the second quarter of 2007, The Conference Board reported Wednesday.
The Chief Executives’ Confidence Measure, which had improved to 53 in the first quarter of 2007, fell to 45 in the second quarter, according to The Conference Board’s latest survey of nearly 100 business leaders in a wide range of industries. A reading of more than 50 points reflects more positive than negative responses.
“Several quarters of sluggish economic growth have taken a toll on CEOs’ confidence, erasing two quarters of improvement,” Lynn Franco, director of The Conference Board Consumer Research Center, said in a statement. “Looking ahead, CEOs do not expect a significant turnaround in conditions and profit expectations. Only a quarter expect profits to increase versus three-quarters last year, reflecting their pessimistic outlook.”
CEOs’ assessment of current economic conditions was little changed from earlier this year, with 23 percent of CEOs — compared with 24 percent last quarter — claiming the current economic environment is better. In assessing their own industries, however, business leaders were considerably less optimistic. Approximately 23 percent claim conditions are better, down from about 37 percent in the first quarter.
CEOs are less optimistic about the short-term outlook than last quarter, as just 17 percent of business leaders expect economic conditions to improve in the next six months, down from 27 percent last quarter. Expectations for their own industries were also significantly less positive, with 17 percent anticipating an improvement, down from 35 percent last quarter.
On the issue of profit expectations over the next 12 months, only 22 percent of executives anticipate increases. Executives engaged in the nondurable goods industry are the most optimistic, with 18 percent expecting profits to increase. Executives in the durable goods industry are a close second, with 11 percent anticipating a rise in profits.
Among chief executive officers who expect profits to increase, 46 percent believe technology will drive profits up, while 29 percent cite price increases as the main source of improvement. Only 17 percent foresee market/demand growth as a driver of growth, and the remaining 8 percent cite cost reductions.