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CEO Confidence Index July 2005

 Indicator Recovers After Two-Month Roller Coaster CEOs Urge Washington to Take Free Market Stance on Global Trade The CEO Confidence Index …

 

Indicator Recovers After Two-Month Roller Coaster CEOs Urge Washington to Take Free Market Stance on Global Trade

 

The CEO Confidence Index dropped 2 points to 163.1 this month, according to 404 top executives surveyed. This month’s drop is relatively minor compared to the movements in the past two months, when the index fell then subsequently rose by almost 20 points. The basic sentiment of CEOs is confident but cautious. Though there are fears over the prices of energy and raw materials, the United States is “still a big country with a big appetite,” in the words of one CEO. All CEOs were polled before the terror attacks on London on July 7.

 

 Of the six indicators that are tracked, the Current Confidence Index, standing at 189.4 points, is the only one that did not have a negative change this month, though all changes were negligible. CEOs feel that the current economy is robust, and 72% think slow growth is to be expected over at least the next quarter. Interest rates are relatively low, historically, and the economy has recovered from the tech-bubble. In all, according to one CEO, “business is good and the economy continues to expand.”

 

However, not all CEOs are so optimistic about the future. The Future Confidence Index fell this month by 3.4 points to 145.3. This marks a gap between current and future confidence of 44.1 points, the largest gap between the two seen to date. Though future confidence fell little this month, the growing gap suggests a lack of structural confidence in the future of the U.S. economy.

 

The hesitance by CEOs to feel confident about the future of the economy is put in perspective by the factors they evaluate upon rendering their judgment. Given future prospects, CEOs feel there is not much hope on the horizon. Said one CEO, wishing to remain nameless, “The U.S. is in for some hard times. Interest rates will climb, energy costs will climb, [and] Congress and the President are spending money like they are drunken sailors who have been out of port for 6 months.” With no foreseeable end to unrest in the Middle East, and a possible housing market bubble upon us, CEOs feel there is more to celebrate now than there might be down the road.

 

 Their caution also impacts fears on employment and business conditions. Said one CEO, referring to the recent low jobless numbers as misleading, “while the number of new jobs created is improving, the ratio between jobs destroyed and jobs created is not high enough in favor of new jobs. Too much of the current economic health is driven by a hyper-inflated housing market.”

 

Chief Executive also conducted additional polling this month to discover the thoughts of CEOs regarding international trade, especially in light of the UNOCAL buyout bid by a Chinese company. CEOs are united in their thoughts: free trade should be embraced by Washington.

 

CEOs were asked whether Chinese, German, Indian, and Japanese companies should be allowed to invest in the U.S., and also whether or not our domestic firms should be able to invest in the same countries. Considering all four countries, at least 80% of CEOs are in favor of free trade. Calls for free trade got as high as 88% among CEOs (when asked whether U.S. companies should be allowed to invest in Germany), though a marginally smaller 73% of CEOs thought Chinese companies should be allowed to invest in the United States. This is a clear mandate for free trade, given that approximately only 8% of CEOs voiced the opposite viewpoint.

 

This is not to say that CEOs blindly push for open access to all markets. They believe, according to one CEO surveyed, “free trade also means fair trade. As part of giving access to our markets, we need to have access to their markets.” In the minds of CEOs, free trade is not and should not be a one-way street. “CEOs are fully aware that free markets are the road to wealth,” said President and CEO of Chief Executive Group, Edward M. Kopko “Where the United States and their trading partners avoid trade protections, there are great benefits, both foreign and domestic, and CEOs recognize this.”

 

The CEO Confidence Index normally is released on the third Tuesday of each month.  For additional information regarding the confidence of public- and private-company CEOs, details about regional CEO attitudes on employment, investment and business conditions, as well as confidence differences between service and non-service industry CEOs.

 

 Chief Executive is a controlled circulation magazine that has been published since 1977. It reaches 42,000 chief executive officers and their peers, reaches a total readership of 170,000, and is published 10 times a year.  Chief Executive Group facilitates “Chief Executive of the Year,” a prestigious honor bestowed upon an outstanding corporate leader, nominated and selected by a group of his or her peers.  Fred Smith, Hank Greenberg, Bill Gates, John Chambers, Michael Dell and Sandy Weill are just some of the leaders who have been honored during the award’s 19-year history.  Chief Executive also organizes roundtable meetings and conferences to foster opportunities for top corporate officers to discuss key subjects and share their experiences within a community of peers. 

 

Should Chinese companies be restricted from investment in  U.S.?

 

 17.8

 Yes

 73.2

 No

 9

 Unsure

 

Should India companies be restricted from investment in the U.S.?

 

 12.5

 Yes

 80.3

 No

 7.3

 Unsure

 

Should German companies be restricted from investment in the U.S.?

 

 8.8

 Yes

 85.5

 No

 5.8

 Unsure

Should Japanese companies be restricted from investment in the U.S.?

 8.8

 Yes

 85.5

 No

 5.8

 Unsure

Should U.S. companies be restricted from investment in China?

 9.5

 Yes

 81.8

 No

 8.8

 Unsure

Should U.S. companies be restricted from investment in  India?

 7

 Yes

 86.5

 No

 6.5

 Unsure

 Should U.S. companies be restricted from investment in  Germany?

 5.8

 Yes

 88.3

 No

 6

 Unsure

Should U.S. companies be restricted from investment in  Japan?

 6.3

 Yes

 88

 No

 5.8

 Unsure

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