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66 Percent of CEOs Plan to Freeze or Downsize Workforce Size

The beginning of August brought Washington’s debt ceiling circus followed shortly by S&P’s downgrade of American debt. And, in turn, CEO confidence in business conditions remained negative. Though the CEO Confidence Index rose slightly (0.4 percent) it remained at a dismal 5.30 out of a possible 10. As one CEO put it, “As I approach my 44th year in business, the last 20 as a CEO, I can never remember a time when I felt so disenfranchised from our leadership in Washington.

Despite a politically and economically tumultuous start to the month of August, CEO confidence stayed steadily pessimistic. Although the index did rise – for the first time in months and by only 0.4 percent—it still remains at a low 5.30 out of a possible 10.  The Index, Chief Executive’s monthly gauge of CEOs’ perceptions of overall business conditions, has seen a 17 percent drop from February’s 2011 high of 6.39. Now, only 45.3 percent of CEOs expect business conditions to be at least ‘good’ in the next year, up from July’s 41 percent.

Despite the debt ceiling drama and the S&P’s downgrade, the view of current conditions only dropped .01 from July to 4.64 out of 10.

One CEO attributes the steady, albeit tepid, numbers to individual company performances versus business conditions as a whole, “Individual companies may do well coming out of the recessions, but the cyclical economy will accelerate.  This will be exacerbated by poor domestic policy in a world of countries hungry to compete.”

Expectations for the future remain wary and generally pessimistic. Fewer chief executives expect to see an increase in revenue over the next year as compared to July; only 59.11 percent expect a revenue increase versus July’s 60.6 percent.  This is a 20 percent drop from April when 74 percent of CEOs expected to see increased revenues.

Just over half of CEOs do, however, expect to see an increase in profits, a slight improvement over last month.  In July, 52 percent of chief executives expected a profit increase, whereas 53.13 expected a profit increase in August.

July’s better-than-expected unemployment numbers also seem to be echoed here.  The unemployment rate moved down slightly to 9.1 percent and 34.43 percent of CEOs expected to increase hiring over the next year (although the 66 percent majority of CEOs don’t expect to increase hiring).

Following the debt ceiling circus, attitudes toward the government have remained sour.  One CEO said, “As I approach my 44th year in business, the last 20 as CEO, I can never remember a time when I felt so disenfranchised from our leadership in Washington.  They seem determined to continue their ongoing anti-business attitude and to frustrate small and mid-sized businesses by uncertainty on taxes, government regulations, and simply too many bureaucratic restrictions.  We desperately need a change in Washington.”

CEO Confidence Index — August 2011

Respondents: 247

July 2011 August 2011 Monthly Change
CEO Confidence Index 5.28 5.30 + 0.4%

 

What do expect overall business conditions to be like one year from now on a 1 -10 scale? (10 = Excellent)


What is your assessment of current overall business conditions on a 1-10 scale? (10 = Excellent)


Over the next 12 months, what changes do you forecast for your firm compared to the past 12 months?


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