CEO Confidence Index September 2006

Confidence At Lowest Level In Over A Year CEOs Split On Campaign Issues, Think Republicans Will Retain Control of Congress

September 19 2006 by Chief Executive


 Click the image to see Ed Kopko on CNBC

TaxesAgainst the backdrop of a stock market on the rise since mid-summer, the Chief Executive CEO Confidence Index has continued to fall. Continuing its downward trend for the 4th straight month, the leading economic indicator fell 9.0 points to 148.9, according to 286 top executives surveyed. Its present level is the lowest it has been since May of 2005, and the second lowest it has been in almost 3 years, since November of 2003. One CEO respondent noted pithily, “The economy is at a tipping point.”

The Employment Confidence and Future Confidence sub-indices contributed most to this month’s drop, falling by 12.5 and 9.5 points respectively. They are the only 2 component indices to fall by more than the overall CEO Index this month.

Of those surveyed, 21.4% said they expected employment to decrease over the next quarter, the highest portion since June of 2003, and 16.8% of survey respondents said they expected capital spending to decrease at their company over the next quarter, the highest level since May of 2003. One respondent explained, “Many indicators are pointing towards a slowdown.  A major event such as another terrorist attack or major hurricane could really crush this economy in its present state.”

This month as well, 14.8% of respondents said they expect the economy to gradually decline over the next quarter. This level of pessimism is the highest it has been since October, 2002. In all, 41.6% of CEOs feel the economy will either stay where it is or decline. “Currently, I would characterize the optimism of CEOs as tenuous at best,” said Edward M. Kopko, CEO and President of Chief Executive Group. “They are on the brink of feeling neutral towards the economy.”

Chief Executive Magazine also conducted additional polling in the run-up to November’s midterm elections about various campaign issues. CEOs were asked how they expect the elections to turn out, as well as their positions on 6 major campaign issues.

Though CEOs expect the Republicans to remain in control of both houses of Congress, they are much less certain of the fate of the House of Representatives. While over 75% of CEOs expect the Republicans to control the Senate after November’s elections, only 52% felt that the Republicans will still control the House. One CEO said, “The war will cost the Republicans the house in the midterm elections along with the current lack of a sound energy policy.”

CEOs also voiced their opinions on important, relevant policy issues. Most interesting to note is that although most CEOs want to see more resources committed to the war on terror, most CEOs also want to see a decreased presence in Iraq. One CEO said, “We can best fight [Terrorism] through police work, diplomacy and effective use of armed forces. Iraq distracts and detracts from these efforts.”

The majority of CEOs also support making the tax cuts permanent, as well as school choice with pay for performance initiatives. No clear majority arose in the issues of Immigration and Energy (see below for full disclosure of data).

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, visit our full report at http://www.chiefexecutive.net/ME2/Audiences/load.asp?AudID=CEO Confidence Index

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.  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.  A. G. Lafley, George David, Fred Smith, 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.  Visit http://www.chiefexecutive.net/ME2/Audiences/load.asp?AudID= for more information.

CEO Index, September 2006
Respondents: 286

  Sep-06 Change from Prev Month

 Ceo Index

 148.9

 (9.0)

 Current Confidence Index

 186.8

 (8.2)

 Future Confidence Index

 123.3

 (9.5)

 Business Condition Index

 165.8

 (7.6)

Invest Confidence Index

 126.8

 (7.3)

Employment Confidence Index

 158.8

 (12.5)

 Taxes
 Make Tax Cuts Permanent 63.5%
 Maintain Status Quo 19.9%
 Restore higher taxes 16.6%

Immigration  
Decrease restrictions on immigration 31.7%
Maintain Status Quo 18.7%
Increase restrictions on immigration 49.6%

Energy Prices
Decrease environmental regulations and government controls on energy requisition43.0%
Maintain Status Quo29.7%
increase environmental regulations and government controls on energy requisition 27.2%

 Iraq 
 Decrease presence in Iraq 50.5%
 Maintain Status Quo 34.5%
 Increase presence in Iraq 14.9%

War on Terror  
Commit fewer resources to the war on terror 14.2%
Maintain status quo 30.7%
Commit more resources to the war on terror 55.1%

 Education 
Increase school choice and pay for performance initiatives in public schooling70.0% 
Maintain status quo 10.4%
Support the teachers union and invest more in the public school system 19.6%

 Which party will control the House after the mid term elections?
 Democrats 47.8%
 Republicans 52.2%

                                       

Which party will control the Senate after the mid term elections?

 Democrats 24.4%
 Republicans 75.6%