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CEO Confidence Index February 2008

Lowest Level of Optimism in Future Employment Since Early 2003. CEOs Welcome Last Month’s Fed Rate Cuts: Voice Skepticism about the Stimulus Plan

The economy may not be turning around any time soon according to Chief Executive Magazine’s CEO Confidence Index, which fell sharply in February. 

The CEO Index, which tracks the economic sentiment of CEOs in five specific areas of the economy-current, future, business, investment and employment-fell by 14.3 points, 12 percent, to 109.4.  Leading the pack of losses was the Employment Confidence Index-historically a very accurate predictor of the overall employment rate of the economy-which fell by 31.9 points, or 24 percent, to 103.0. 

“CEOs have experienced a dramatic drop in confidence since August of 2007,” said Edward M. Kopko, CEO and Publisher of Chief Executive magazine. “With December and January showcasing brief stabilization, some CEOs were starting to think that the worst was over, but now that theory has been thrown into disarray.” 

This month, CEOs’ pessimism in future employment reached record levels, as  46 percent of respondents expected employment to decrease over the next quarter, while only 12 percent expected an increase. This was the biggest ratio of pessimistic to optimistic job growth predictions since the Index began tracking job prospects in 2002.             

The Future Confidence also fell sharply in February, shedding 19.6 points, or 19 percent, to its current level of 81.3.  In fact, this is the lowest level in history since the polling began in November of 2002.  Thirty-seven percent of CEOs said they expect gradual or rapid decline in the next 3 months, while none of the CEOs expected rapid growth and only 23.5 percent expected growth. 

Kopko commented, “The sentiment and total outlook we see among CEOs today, looking at all the different indices, including current, future, business and employment indexes, is the weakest we’ve ever seen.”  

Voicing the concerns of CEOs, one respondent said, “Unfortunately most CEOs are convinced of a pending severe slowdown in the US over the next 6-9 months and are bunkering down and preparing for this scenario.”  

“We are a long way from restoring consumer confidence and presently not even heading in the right direction,” said another CEO.             

CEOs  see wisdom in rate cuts, but question impact of rebate plan

In additional polling this month, Chief Executive magazine asked CEOs their opinion on recent Fed rate cuts as well as the stimulus package. The CEOs were asked three questions: whether they thought the decisions were wise from a policy perspective, whether they would help the economy, and whether they would help their businesses. 

The polling revealed that CEOs overwhelmingly approved the rate cuts on all fronts. Eighty percent said the rate cuts made a wise policy decision, 73 percent said they would help the economy and 55 percent said it would benefit their businesses. 

Reaction to the rebate plan was substantially more skeptical.  Sixty-six percent of respondents criticized the policy decision, saying it was unwise, and 78 percent said it would not help their businesses. Moreover, more than half of the respondents, 56 percent, said the plan wouldn’t help the economy. 

One of the main concerns CEOs voiced about the stimulus plan was its potential for a long-term impact, “The consumer rebate will only give a small, one-time blip to the economy.  It will not produce a lasting effect,” said one CEO.  Other CEOs pointed out the political realities that contributed to the decision, “Politicians from both sides of the aisle continue to encourage short-term solutions for long-term problems,” said Louis Kravitz, President of Paragon Lines, Inc.   

The CEO Index polling was conducted among 261 executives between February 12th and 22nd.  For additional information regarding the confidence of public- and private-company CEOs, details about CEO attitudes on employment, investment and business conditions

CEO Index, February 2008
Respondents: 261

 

 February 07

 Monthly Change

 CEO Index

 109.4

 -14.3

 Current Confidence Index

 150.8

 -6.8

 Future Confidence Index

 81.3

 -19.6

 Business Condition Index

 120.8

 -4.6

 Invest Confidence Index

 104.3

 -9.4

 Employment Confidence Index

 103

 -31.9

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Please indicate to what extent the following factors affected your confidence this month:

 

 Yes %

No % 

Do you think the recent rate cuts by the Federal Reserve were a wise policy decision?

 80%

20% 

Will they help the economy?

 73%

27% 

Will they help your business?

 55%

45% 

Do you think the recent rebate plan passed by the Federal Government is a wise policy decision?

 34%

66% 

Will it help the economy?

 44%

56% 

Will it help your business?

 22%

78% 

 

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