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CEO Confidence Falls to Grim Ten-Month Low

After plummeting more than 12 percent in June, CEO confidence continued its downward spiral in July and fell to a 10-month low of 5.28 out of a possible 10. The outlook for the American workforce is grim; the unemployment rate reached 9.2% in June, and according to the CEO Confidence Index more than 45 percent of CEOs expect not to do any hiring over the next 12 months. Another indication that business conditions aren’t going to improve anytime soon? Forty-two percent of CEOs won’t increase their capital expenditures in the next year, a 12.6% increase from June.

Following a drop in June of more than 12 percent, CEO confidence continued to weaken in July.  Hitting a ten-month low, confidence levels fell to only 5.28 out of a possible 10.  The Index, Chief Executive’s monthly gauge of CEOs’ perceptions of overall business conditions, has seen a 17.4 percent drop from February’s 2011 high of 6.39.  Only 41 percent of CEOs expect business conditions to be at least ‘good’ in the next year, a 13 percent drop over the last month and a 42 percent drop from February.  CEOs also cite current business conditions which were rated 4.65 out of 10.

Expectations for the future seem to be pessimistic all across the board; profit, revenue, hiring and capital expenditures all took a hit this month.  Only 60.6 percent of CEOs expect to see an increase in revenue over the next year compared to 74 percent in April and May and 63.7 percent in June.  Of those who do expect to see a revenue increase, 55 percent expect the increase to be by less than 10 percent.

Profit outlook is also dim with roughly 52 percent of CEOs expecting to see increased profits as compared to June’s 55 percent and May’s 65.5 percent. CEOs are so wary of future business conditions that over 66 percent expect that the size of their workforce will either stay the same or decrease over the next year.  Those who plan to hire will do so in a limited way; 74 percent of hiring CEOs will increase their workforce by less than 10 percent. This does not bode well for the 9.2% of US workers who were unemployed in June.

Another indication of the weak economy is CEOs’ hesitation to invest in their own company; 42 percent of CEOs expect not to see an increase in capital expenditures over the next year. Of the 40 percent that do expect to increase capital expenditures, 60.6 percent will increase their investment by less than 10 percent.  Philip Grantham, Managing Director for Columbia Consulting Group confirms the numbers, “There is a level of ‘risk adversity’ in the executive marketplace that we have not witnessed in a long time.  In prior recoveries, most CEOs have taken a ‘glass half-full’ approach to the future.  In this environment, there is no willingness to make any significant commitments until the economy demonstrates that it is growing again.”

And most CEOs seem to think that American businesses are being stifled by over-regulation, a consistent theme for the CEO Confidence Index.  One CEO said, “our business is being regulated to death by the federal government with more new regulations coming with the establishment of the Consumer Financial Protection Bureau…enough already! Congress wants business to get going and hire more employees but the regulatory environment for our business is driving us just the opposite direction.”

As businesses continue to be uncertain about the future, the country’s recovery will be weak. As one CEO put it, “Investment in business needs to be rewarded, not penalized.  Creativity and entrepreneurship are what has built this GREAT nation. Why does this administration want to destroy the essence of the United States?”

CEO Confidence Index — July 2011

Respondents: 251

June 2011 July 2011 Monthly Change
CEO Confidence Index 5.36 5.28 – 1.4%


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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