Home » CEO Confidence Index » CEOs Continue to Rate Overall Business Conditions as Less than “Good”; CEOs of Small Companies are the Least Confident of All

CEOs Continue to Rate Overall Business Conditions as Less than “Good”; CEOs of Small Companies are the Least Confident of All

The CEO Confidence Index, Chief Executive‘s monthly gauge of CEOs’ expectations for business conditions over the next 12 months, rose 1.2% in November, reaching 5.7 out of a possible 10.

The CEO Confidence Index, Chief Executive‘s monthly gauge of CEOs’ expectations for business conditions over the next 12 months, rose 1.2% in November, reaching 5.7 out of a possible 10. This is the exact same rating given just two months ago, maintaining a trend over the last four months where the Index has not been above 5.9 or below 5.6. Overall, CEOs’ confidence in business conditions has remained stagnant. Despite improving jobs reports and all-time highs on domestic stock indices, optimism in both the current and future conditions for business remain unchanged.

“There is so much uncertainty in the global economy that I am reluctant to pull the trigger on certain deals that in the past I would have done. Being ultra conservative has become the business norm. Every time it starts to clear and things look better, something else comes up that makes you think twice,” said one CEO who works in the professional services space.

A similar message of uncertainty came from the CEO of middle market industrial manufacturing company: “[We’re] unable to make estimates based on past experience or customer contacts. Most are waiting to see the impact of the Obamacare implementation on the business climate and corporate costs.” This CEO expects decrease in revenue, profit and headcount over the next 12 months.

The vast majority of comments we received mentioned the federal government and a lack of confidence that the proper steps are being taken to prop up businesses. “We are being punished by sequestration, which had a material impact on revenues and profits in 2013. We are working hard to diversify into new markets and economies going into 2014, so we should return to more typical sales and profitability. Government inaction and ineptitude is the key problem for us, as it is for the overall economy,” said another CEO respondent.

The most startling revelation from our continue research into CEOs’ perceptions on business conditions is that the majority of the pessimism is coming from CEOs of the smallest companies. For companies with less than $10 million in annual revenue, CEOs rated their confidence in current overall business conditions at 5.11 out of 10; this is 7.8% lower than the overall rating (5.54) and almost 10% lower than the rating from CEOs of companies with more than $100 million in revenue (5.65).

The CEO of a small marketing agency summed up her experience recently, noticing that political leanings are not affecting the perceptions of her clients and that, pragmatically, it appears that uncertainty around the actions of the federal government is having a pernicious trickle-down effect. “We are a small B2B agency. Our success depends on the success of our clients – many of whom are Fortune 500 companies. The trend towards cash hoarding and profitability through reduction in expenses continues. The C-Suite clients we deal with (both liberal and conservative) are worried about what impact the government will have on business going forward. It’s an unsure environment still and we see no promise of growth in the next 2 years.”

Over the past several years, we’ve seen a growing trend of business leaders truly being fed up with government. At first, it appeared to be partisan-related when Obama first came to office. However, politics seems to have little to do with it currently. The CEO of mid-sized nonprofit articulated a view we see time and again from other business leaders: “As a result of Washington activities and leadership, there are feelings of uncertainty, disappointment, downright disgust, and lack of confidence in and trust of government and some business leadership. Politics seems to pursue absolute power, not what is best for the country and all its people.”

While uncertainty is an easy problem to blame for businesses not expanding, it is becoming increasingly clear that CEOs believe the American political system is broken and not acting in the best interests of the people and businesses they are meant to be helping most. As it stands currently, a fifth of our respondents expect to reduce headcount over the next year, 17% expect a decrease in revenues, and only 39% expect an increase in capital expenditures. These numbers are certainly alarming, and it appears only a major shake-up in Washington DC can affect any short-term change in expectations.

CEO Confidence Index — November 2013

Respondents: 226

October 2013 November 2013 Monthly Change
CEO Confidence Index 5.64 5.70 +1.2%

About ChiefExecutiveNet

Chief Executive magazine provides global economy coverage, business and technology news, information on upcoming events, and executive life.