Less than a quarter of CEOs think the economy will improve in the next 6 months
Senior executives are less confident about the economy in the third quarter of 2010 than they were the previous quarter, according to a leading indicator.
The CEO confidence measure has declined from 62 points to 50, according to the Conference Board. A reading of more than 50 points reflects more positive than negative responses.
Lynn Franco, Director of The Conference Board research said: “CEO confidence has cooled considerably in the second half of 2010, as has the US economy. And, expectations are that this slow pace of economic growth will continue into early 2011. Regarding capital spending plans, the news was a bit more favorable with three out of every ten chief executives saying they had increased capital spending plans since the start of this year, a significant improvement from last year when only 7 percent reported increases.”
CEOs’ appraisal of current economic conditions was much less favorable in the third quarter. Less than one-third say conditions have improved compared to six months ago, down from about two-thirds last quarter.
In assessing their own industries, business leaders’ appraisal was also considerably less positive. Now, only 38 percent say conditions are better, compared with 61 percent last quarter.
CEOs are much more pessimistic about the short-term outlook. Only 22 percent of business leaders expect economic conditions to improve in the next six months, down from 48 percent last quarter. Expectations for their own industries are also downbeat, with about 28 percent of CEOs anticipating an improvement in the months ahead, down from 43 percent last quarter.
But capital spending up
Two out of every ten business executives report scaling back on their companies’ capital spending plans since January of this year, while three out of ten have increased spending, based on a supplementary question. This is a considerable change from last year, when just 7 percent of chief executives had increased capital spending plans and
58 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 one of the top reasons for a decrease in spending plans.
Survey results were fielded from mid-August to mid-September.