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CEO Confidence Index August 2010

Despite small gains in July, CEO confidence remains weak.

Chief Executive magazine’s CEO Confidence Index, the nation’s only monthly CEO Confidence Index, rose slightly in August, gaining 9.4 points to 89.2.

While all five components of the index showed modest gains, the index has gained only 3.8 points over the December, 2009 level. The government stimulus package has failed to stimulate CEO confidence.

Employment remains a significant hurdle. The Employment Confidence Index gained 3.2%, from a low level, rising to 79.1. Several CEOs commented on the importance of employment growth to a full economic recovery. One CEO stated, “Unemployment continues to be a major obstacle to growth of the economy. The politicians have forgotten this issue”. Wess Schmidt, President and CEO of Strategic Business Planning and Development, told Chief Executive, “The government has run out of stimulus ideas and the country’s economy is still in bad shape. What they should have focused on immediately is the employment numbers and that would have bolstered the rest of the economy… Employment is like a train effect, fix the locomotive and the rest of the cars will follow.”

The Business Condition Index rose to 89.4, a gain of 6.6%.

The Future Confidence Index rose 6.9% to 105.8. The Future Confidence Index, which measures the outlook on employment, and capital spending opportunities over the next quarter, remains the highest scoring component of the index.

The Investment Confidence Index increased to 96.9, a gain of 18.5%. CEOs rating the current investment opportunities as “good” increased from 15.0% to 27.4%. Access to capital for small businesses remains a challenge. “The issue is not a demand for credit, but the availability of credit for small businesses. There is no effective equity market for a small business, the only hope for most of them is the Small Business Administration,” declared a CEO.

The Current Confidence Index rose 19.6% to 64.7. While this component showed the largest percentage gain of all of the indexes, it remains the lowest index in actual point value, and reflects a bleak mood by most CEOs. John Davies, CEO of JLD Enterprises, commented, “I feel that the economy will stay pretty much at the same level as it is currently”. Added another CEO, “Despite the news from D.C., unemployment is high, availability of capital is down and the economy is doing poorly.”

One Chief Executive Officer expressed optimism, “For those that do have strong balance sheets and access to capital and liquidity, the environment is ripe with opportunity for acquisition, organic growth and capturing market share.“ The majority of CEOs were not so upbeat. “Given the direction of government growth, regulation, taxation, foolish spending and lack of accountability or responsibility, I believe the U.S. economy has a very rough road ahead,” observed one CEO. Another added, “I just went to Cedar Point to ride roller coasters, so I can be ready for the next 12 months.”



CEO Confidence Index, August, 2010
Respondents:  267

Index

July, 2010

August, 2010

Monthly Change(%)

CEO Index

79.8

89.2

10.5%

Current Confidence Index

52.0

64.7

19.6%

Future Confidence Index

98.5

105.8

6.9%

Business Condition Index

83.5

89.4

6.6%

Invest Confidence Index

79.0

96.9

18.5%

Employment Confidence Index

76.6

79.1

3.2%

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