The Chief Executive magazine CEO Confidence Index, which measures C-Suite confidence in various aspects of the economy from hiring to investing to the overall business climate, continued its record drop in September, falling 10 percent to 130.5 points, the lowest it has been since August 2003.
The Index, which has experienced the sharpest consecutive decline in its history, is off 23 percent from its high of 169.3 in July, before worries about the credit markets began to take center stage.
“CEOs are very in tune with the requirements of their suppliers, the needs of their customers, as well as with their own ability to carry out a strategy of growth. They remain more concerned that some fundamental aspects of the economy are under stress than many in the investing community. In particular, our data suggests a continuingly weak hiring environment,” said Edward M. Kopko, Publisher & CEO of Chief Executive Group.
Among the five indices measured by the nation’s only monthly CEO Index, the Employment Index experienced the sharpest drop, falling 19 percent to 132.5-30 percent off of its high of 188.9 in July.
Historically, the Employment Confidence Index has been a very sharp future predictor of employment, displaying a strong statistical correlation with employment numbers released by the Bureau of Labor Statistics, and can be used to explain over 70 percent of employment changes that occur six months into the future. As such, when asked about their future hiring plans, 34 percent of CEOs said they expect hiring to decrease over the next quarter-the highest level since the Index began in 2002-while only 20 percent of those surveyed said they expect employment to increase over the next quarter.
The Current Confidence Index, which measures how confident CEOs are currently relative to the future, recorded second biggest percentage loss among the five indices, falling by 13 percent to 166.4. Linking current worries over the mortgage market to the economy in general, one CEO explained, “Housing and mortgage problems are going to have a severe impact on the economy.”
Polling was conducted among 180 top executives just prior to the 50 basis point Federal Funds Rate cut on September 18th.
CEO Index, September 2007
Current Confidence Index
Future Confidence Index
Business Condition Index
Invest Condition Index
Employment Confidence Index
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Nanette Byrnes, Business Week, October 22, 2007.