A key indicator that measures chief executives’ confidence in the economy dropped again in the third quarter of 2007, as current business conditions continued to cast a dreary mood across many industries, The Conference Board reported today.
The Conference Board Measure of CEO Confidence, which had declined to 45 in the second quarter of 2007, edged down to 44 in the third quarter, according to a 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.
CEOs’ assessment of current economic conditions was less favorable in the third quarter, with just 14 percent claiming economic conditions had improved, down from 23 percent in the second quarter of 2007. In assessing their own industries, business leaders were also less optimistic, with approximately 17 percent claiming conditions are better, down from approximately 23 percent in the first quarter of 2007.
“Despite the rather bleak assessment of current conditions, CEOs are not as pessimistic in their short-term outlook,” Lynn Franco, director of The Conference Board Consumer Research Center, said in a statement. “But although the outlook is somewhat brighter than last quarter, the pace of growth is likely to remain moderate in the months ahead.”
According to the third-quarter survey, approximately 20 percent of business leaders expect economic conditions to improve in the next six months, up from 17 percent last quarter. Expectations for their own industries are also more upbeat, with 27 percent anticipating an improvement, up from 17 percent last quarter.
Some 24 percent of business executives report increases in their companies’ capital spending plans since January of this year, while 13 percent have scaled plans back, based on a supplementary question asked each year in the third quarter. This is a moderate change from the 2006 survey, when 28 percent of respondents had increased their capital spending plans and 9 percent had made cuts. Among the reasons given for increasing capital investment plans, the most common was an increase in sales volume. A decline in sales volume was the most cited reason for a decrease in spending plans.