The CEO Confidence Index, our monthly gauge of CEO expectations for the future of business conditions, dropped in April to 5.86 out of a possible 10. The Index also dropped 0.8% in March following a four-month streak of increased optimism.
The number of CEOs who expect to see an increase in revenues over the next year is down to 69.6% from March’s 73.5%, but the number of CEOs who expect to see an increase in profits is up to 64.2% from March’s 61.2%.
The amount of optimism does seem to be correlated with company size, and larger companies seem to have a more positive outlook on what business conditions are going to look like. Over 71% of CEOs whose companies saw more than $1 billion in revenue in 2011 predict that business conditions will be at least ‘good’ over the next year. CEOs of $100 million to $1 billion companies are also more optimistic; 70.5% expect conditions to be at least ‘good.’
Companies in lower revenue brackets, however, were less optimistic than those higher revenue brackets. Just over 61% of CEOs of $25 million-$49.9 million companies think business conditions will be at least ‘good’ over the next year, and only 39% of CEOs with $10 million-$24.9 million expect ‘good’ or better conditions.
Many of these concerns hinge on the November presidential election.
Since the beginning of the election cycle, CEOs have been extremely focused on the impact that a change in government could have on the economy. Most seem to think that a reelection of President Obama would hinder economic progress; they are rooting for a republican candidate who will make it easier for businesses to operate.
As one CEO said, “Nothing will change in a positive way until the threat of increased taxes, in any form, and regulation is clearly behind us. We cannot effectively plan when we are the target for every level of government who needs to resolve budget deficits. Job creation solves budget issues.”
As another CEO put it, “It all depends on the election. A lot of money will be invested if Obama gets fired.”
And since the election promises to be a close one (that might not end in business’ favor), many CEOs are holding out on making many moves domestically. One CEO stated, “The activity of our organization in countries outside of the USA is much more aggressive.”
CEO Confidence Index — April 2012
|March 2012||April 2012||Monthly Change|
|CEO Confidence Index||5.98||5.86||-2.0%|