CEOs Still Optimistic, On the Brink of Pessimism CEOs Fear Katrina’s Impacts, Rising Oil Prices
The CEO Confidence Index fell this month to 150.9 according to 472 top executives surveyed by Chief Executive Magazine. Though CEO Confidence has stayed at the same general level over the past 18 months, any more turns for the worst could turn executive sentiment from skeptical to pessimistic. CEOs seem to be quite concerned about the current economic climate, citing rising energy prices and continuing hurricane damage as chief concerns. This month’s drop of 13.7 points was the 2nd biggest since the Index was started in 2002. Still, CEO Confidence is significantly above its low of 89.4 during the Iraq War.
All component indices similarly fell this month. The Employment Confidence fell the most this month, dropping by 20.8 points to 161.7. Only 36.3% of CEOs rate current employment conditions as “Good,” while 63.6% of them plan to decrease or hold hiring at their companies. The Employment Index still stands at a relatively high level, though it has dropped from its high of in the mid 180s.
On the other hand, the Investment Conditions Index only fell by 2.7 points this month, suggesting some positive feelings on the horizon. In fact, only 12% of CEOs rank current investment opportunities as “Bad” and over 41% of CEOs surveyed plan to increase capital spending at their companies.
Tough economic conditions due to Hurricane Katrina and rising energy prices, however, caused the Business Conditions Index to fall hard this month as well. It sunk by 20 points to 164.9. Said Andrew Hayman, CEO of CoAMS Holdings, “at some point the cost of energy will reach a threshold that will compel consumers to change their behavior and manufacturers… to provide viable alternatives.”
Chief Executive also conducted special polling this month to put recent external shocks to our economy in context. Choosing from the Dot-Com Bust, 9/11, recent corporate scandals, the Iraq War, rising energy prices, and Hurricane Katrina, CEOs were asked to give their input as to which events most negatively impacted our economy. Surprisingly, CEOs ranked a diffuse harm, rising energy prices, as the most negative. Close in second place was 9/11, and the Dot-Com Bust was considered a distant third as far as its negative impact was concerned. Said Edward M. Kopko, chairman and CEO of Chief Executive Group, “given the past challenges our economy has faced, CEOs still remain optimistic. But while we have enjoyed a long period of relative confidence, this month’s drop raises serious concerns over whether CEOs are on the brink of pessimism.”
CEOs were also asked to comment on how long they felt the economy would feel the impacts of Hurricane Katrina. After seeing confidence drop only slightly last month in response to Katrina, the aftermath of the hurricane is now being fully evaluated by CEOs. Over two-thirds of CEOs (67.1%) thought the impact would last one year or longer, while the other third felt the impacts would wear off after 6 months or less. Said Barbara Schindler, COO of Golden Artist Colors, Inc., “Katrina has had an immediate impact on consumers and business in energy costs, yet the larger impact will hit in the year to come.”
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. George David, 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 20-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.
Chief Executive’s Hurricane Katrina, Economic Challenges Special Polling:
How long will the U.S. economy feel the impacts of Hurricane Katrina?
2 years or More
Top 3 Negative Challenges to the US Economy Since 2000:
Surging Energy Prices
The Dot-Com Bust