CEO Confidence Index October 2007

Only a Quarter of the CEOs Surveyed Believe a Recession is Likely

November 14 2007 by Chief Executive


Chief Executive Magazine today announced the results of its monthly ”CEO Confidence Index,” which measures C-suite confidence in various aspects of the economy from hiring to investing to the overall business climate.  According to the survey, CEOs’ confidence continued to decline in October, hitting the lowest level since July 2003, falling two percent to 127.5 points.

This month’s polling, which was conducted among 536 C-level executives between October 8 and 19, highlighted the divergence between the stock market and CEOs’ reaction to the Fed’s September 18 rate cut. 

“We are seeing a growing deviation between CEOs’ confidence levels versus the stock market performance,” said Edward M. Kopko, CEO and Publisher of Chief Executive Magazine.  “The discrepancy is suggestive of a potential correction that may be awaiting the stock market, as CEOs’ confidence levels have historically been a lead indicator of how the markets will perform.”

Four of the five indices of the CEO Index dropped in October with the Investment Confidence Index recording the biggest plunge, falling seven percent to 112.0 points.  The only index that experienced an increase was the Employment Index-its first increase since July-rising three percent.  However, CEOs are still cautious about future employment, as a third-33 percent-of them expect employment to decrease over the next quarter.

Moreover, the gap between CEOs’ current and future confidence remained significantly wide, with Future Confidence Index hovering around 37 percent lower than the Current Confidence Index, suggesting CEOs are wary of the ability of the economy to sustain itself.

“CEOs have been signaling for some time their concerns about the economy and this month’s index indicates that these concerns may start to take hold,” said Kopko. 

Supporting Kopko’s comments, Terry L. Stallcup, President and CEO, Ultimate Consulting, Inc. said, “I see our clients being skeptical of the market and being more conservative going into the last quarter.”

In additional polling this month, the magazine asked CEOs their thoughts about the possibility of a recession.  Twenty-five percent of CEOs indicated that they believed the likelihood of a recession in the next 18 months is greater than 50 percent, while 75 percent said it was less than 50 percent.  Meanwhile, 42 percent of the respondents said that the chances of a recession were less than 25 percent.

According to survey respondents, top issues fueling expectations of a recession include the fallout from the sub-prime mortgage shake-up, housing market, rising cost of oil, a weak dollar and the burgeoning national debt.

Commenting on the overall economy, W.R. Price, President and CEO, Independent Builders Supply Association, said, “The impact of housing-compounded with fuel costs at record highs-and the continued spillover from the sub-prime meltdown has not been fully felt yet.  The housing industry is one of the leading economic indicators as far as I am concerned, and unless we can get this €˜motor’ up and running again soon, I am certain we will see a continued decline in the national economy with joblessness taking the lead.”

CEO Index, October 2007

Respondents: 536

 

October 2007

Monthly Change

 CEO Index

127.5

(3.0)

 Current Confidence Index

163.3

(3.1)

 Future Confidence Index

 103.3

 (2.9)

 Business Condition Index

137.3

 (3.7)

 Invest Confidence Index

112.0

 (7.9)

 Employment Confidence Index

136.7

 4.2

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