The Chief Executive magazine CEO Confidence Index, which measures chief executives’ confidence in five specific areas of the economy, experienced the largest one-month drop since the tracking of executive sentiment began in October 2002, falling by 24.3 points, or 14.4 percent, to 145.0, as all component indices dropped by record amounts.
Although the sudden drop in the nation’s only monthly CEO Index was dramatic, the overall confidence levels in C-suite remain in positive territory-and significantly above the levels experienced in spring 2003, when the Index hit a rock bottom.
In additional polling by the Chief Executive Group, CEOs were quick to cite the turmoil in U.S. Credit Markets as the main reason for the decline in confidence: When asked to rank the impact of a variety of factors on their confidence in August, 76 percent of CEOs said the performance of the credit markets was the most important factor undermining their confidence in the market. The second most important factor negatively impacting CEO confidence was Dow Jones’ performance.
On a brighter note, 58 percent of respondents said that the financial performance of their own companies was the most important positive contributor to their confidence. Moreover, in a sign of confidence in the global economy, 40 percent of the CEOs indicated that the overall global economic conditions positively contributed to their confidence in August.
“While CEOs are worried about the potential long-term impact of hastily offered lines of credit,” said Edward M. Kopko, CEO and Publisher of Chief Executive Magazine, “they remain confident in their ability to properly lead their organizations through this turbulent time.”
Mirroring Kopko’s comments, Jim Scatena, President and CEO, FloraCraft, said, “Business conditions and financial results are much better than the Dow might indicate. The housing slump and sub-prime lending issues are concealing all of the good news. If the Fed were to step in and relax some monetary policies, I think the Dow would see a significant jump and everyone would realize that corporate earnings and employment are in good condition.”
Among the five component indices that make up the CEO Index, the biggest losses were recorded by the Future Confidence Index and the Investment Conditions Index, which fell by 17 and 15 percent, respectively.
Similarly, after three months of steady increases, the Employment Confidence Index also fell this month, dropping by 13.2 percent to 164 points, as the number of CEOs who plan to increase hiring in the next quarter dropped to 22 percent from 41.7 percent. However, while CEOs do not expect to increase hiring, they don’t expect significant cuts in employment either: The majority of CEOs, 56 percent, said that they expect employment levels to remain the same over the next quarter, while only 21 percent anticipated a potential decrease.
August CEO Index poll was conducted among 203 top executives between August 13th and August 20th, directly after the Dow Jones went from above 14,000 to below 13,000 in less than a month.
CEO Index, August 2007
Month Over Month Change
Current Confidence Index
Future Confidence Index
Business Condition Index
Invest Confidence Index
Employment Confidence Index
Please indicate to what extent the following factors affected your confidence this month:
Behavior of the credit markets
Dow Jones performance
Your company’s financial performance
Developments in the War on Terror/Iraq War
General current events
Global economic conditions