Following last month’s steep declines, the Chief Executive magazine’s CEO Confidence Index shed another 25.3 points, or 23 percent, this month, falling to 84.1 points, its lowest level since the magazine began tracking executive market sentiment in 2002.
All five component indices-current, future, business, investment and employment-hit record lows in March with the Business Condition Index experiencing the sharpest decline, falling 50 points, or 42 percent.
The dramatic drop in the overall confidence, which stood at 122 points at the end of 2007 and at 169.3 in July 2007, means CEOs have become sharply and decidedly worried about current economic conditions.
In a clear indication of that pessimism, 52 percent of CEOs-the highest percentage ever recorded by the Index-said they would characterize current business conditions as “bad.” This represents a sharp contrast with last month’s figures when none of the CEOs rated current business conditions as being “bad.”
The Employment Index, which has historically been a leading indicator for future hiring trends, has also hit its record low this month, falling 20 points, or 19 percent, to 83 points. Moreover, the percentage of CEOs expecting a drop in employment over the next quarter reached a new peak at 57 percent, compared to 13 percent in March 2007. This is the first time the majority of executives predicted a drop in employment in the upcoming quarter, suggesting that job numbers will continue to weaken as the presidential election nears.
“CEO confidence took a dramatic turn for the worse right before all these fears about a possible recession and the faltering credit markets made headlines,” said Edward M. Kopko, CEO and Publisher of Chief Executive Magazine. “Having accurately foreseen the troubles we are still reeling to comprehend since the summer, their faith in the economy is tenuous, especially considering their expectations for future hiring.”
While politicians and pundits on both sides of the aisle are proposing various remedies for homeowners or struggling financial firms, many CEOs see the market correction as a necessary step before the economy can turnaround. On that note, CEOs are clear to point out that the worst may not be over, with 45.1 percent expecting the economy to continue its correction and experience “gradual” or “rapid” decline over the next quarter.
“Issues underlying the country’s future have been in the making for many years and they are beginning to hit home now,” said one respondent wishing to remain anonymous. Another respondent noted, “The economy needs to work through the problems caused by the sub-prime abuses without government tinkering, which will only make it worse.”
The CEO Index polling was conducted among 321 executives between March 11th and March 26th. For additional information regarding the confidence of public- and private-company CEOs, details about CEO attitudes on employment, investment and business conditions,
Current Confidence Index
Future Confidence Index
Business Condition Index
Invest Confidence Index
Employment Confidence Index