CEO Confidence Down 6.6% in June, Profit Expectations Drop Since January

The CEO Confidence Index dropped 6.6% in June to 5.56 out of a possible 10. The number of CEOs expecting to see increased profits over the next year has fallen 6% since the beginning of 2012.

June 14 2012 by ChiefExecutive.net


The CEO Confidence Index, our monthly gauge of CEO expectations for the future of business conditions dropped 6.6% in June to 5.56 out of a possible 10. The Index saw a small increase in May, but for the most part it has been down since February (and is down almost 4% for 2012).

The number of CEOs expecting to see increased profits over the next year decreased 3.2% since May, and that number is down 6% for the year. Only 56.41% of CEOs expect to see an increase in their profits over the next year, with just under 50% of those CEOs expecting that increase to be by less than 10%.

The number of CEOs expecting to decrease their workforce is up 4.4% since January to 19.9%, and 45% of CEOs expect not to change the size of their workforce at all over the next year. This doesn’t bode well for the U.S.’s employment numbers.

One CEO made it clear that his company has adjusted to a ‘new normal’ over the past couple of years. “On a whole, we are seeing some improvement with our holdings having adapted to a ‘new normal.’ Investment occurs only when a strong business case drives it. Hiring occurs as a last resort when conditions warrant. Our management team went through the tribulations of downsizing multiple times. That pain is vivid in their memories and they are cautious not to get into a situation where it will be required again.”

Another CEO echoed the same hesitation, “Market indicators are not stable enough to warrant capital investment. Available credit terms are too stringent with debt to equity ratios.” On the other hand, this CEO did note, “Cash buyers can find terrific opportunities at deep discounts.”

Michael Dooling, President of Paul Davis Restoration outlined the issues that small business CEOs have been facing. “The regulatory environment and banking/credit issues remain at the top of owner/officer concerns. These concerns will continue through the end of this year. Until business leaders know who will be making the political decisions in America and the European countries, we don’t see any basis for taking on additional risk. We need a road map for where this country is going and unfortunately, it isn’t available.”

As we’ve seen for a long time, CEOs view November’s presidential election as a critical piece to predicting the near future for American businesses. Only time—and the Obama and Romney campaigns—will tell.

CEO Confidence Index — June 2012

Respondents: 239

May 2012 June 2012 Monthly Change
CEO Confidence Index 5.96 5.56 -6.6%

 

What do you 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?