America’s CEOs are increasingly confident that the worst of the Covid-19 crisis is behind us, sparking growing optimism in their outlook for business in 2021—and also in the current economy. And while there remains a deep divide in CEO perceptions based on industry, September’s showing is the strongest for our index in nearly six months—and the fifth month over month gain in a row since bottoming out in May.
But much of this confidence is built on two uncertainties: a vaccine for Covid and a smooth presidential election.
Chief Executive’s polling of 606 U.S. CEOs in the days following Labor Day shows confidence in current business conditions adding another 7 percent in September to reach 5.7 out of 10 on our 1-10 scale. The index is now at its highest level since March.
CEOs say although they recognize that some sectors are still struggling with the effects of the pandemic, the fact that the U.S. economy in general has begun to rebound is fueling their positive sentiment. Many also report renewed growth in sales driven by an uptick in demand, as an increasing number of businesses return to more stable operations and employees return to full employment.
Ray Owens, CEO of PE-backed DX Marketing, is among those feeling positive about the current business environment. He says “increased traffic at brick and mortar retail locations versus simply online” is driving his confidence in both current and future conditions, which he rates as “very good” with a 7 and 8 out of 10, respectively.
Michael S. Holmes, CEO of Platinum Intelligent Data Solutions, a Dallas-based provider of eDiscovery services, rates the current environment as “good” (6 out of 10) based on the fact that his clients are now going back to work and proceeding with projects that had been pending for the past six months. Plus, he says, “there has been a couple of my competitors that have gone out of business, so that has and will help us grow our top and bottom line.”
Robin Pou, a CEO, chief adviser and strategist who has worked with leaders from Fortune 100 companies, says his optimism is rooted in the fact that “corporate investment dollars are being spent” and “RFPs are circulating,” he says, giving the current environment a rating of 7/10 and upgrading it to a 10/10 by this time next year.
Looking ahead, CEO confidence in business conditions 12 months from now is also on the rise, up another 3 percent in September. The leading indicator is now 2 percent higher than it was in January 2020 and 10 percent higher than this time last year, with 4 out of 5 CEOs expecting the business landscape to be “good” to “excellent” by this time next year.
Overall, the global health pandemic and upcoming U.S. presidential election remain the key issues affecting CEOs’ forecasts.
On the Covid-19 front, many of the polled CEOs say the economy should resurge once an effective vaccine becomes available, as it would allow workers to reenter the workplace, further reducing unemployment and increasing demand for products and services across industries, including the hard-hit travel and entertainment sectors.
Andrew Ly, CEO of Sugar Bowl Bakery, one of the largest minority-owned bakeries in America, says although conditions for his business are very good at the moment, as more people go back to work and schools reopen, talks of a looming Covid-19 vaccine will help support the recovery. “It can only get better,” he says.
Rick Sadler, president and CEO of Mega Techway, a global electronic cable assembly manufacturer based in Ohio, agrees business conditions are likely to improve once the vaccine is made available. “Fourth quarter 2020 backlog is weaker than forecasted,” he says. “I’m hoping Covid vaccine will be in place Q2 of 2021 and help rally economic indicators for Q3/Q4 2021.”
Tim Zimmerman, president of Mitchell Metal Products, concurs that a full recovery can only occur once “a Covid-19 vaccine is proven, widely distributed and a large portion of our population is inoculated,” he says, adding “There will be a reset of the economy as a result. Organizations which best anticipate the emerging new economy will fair best.”
David Ragland, president of Kenco Engineering Company, a supplier of instrumentation for various industries, says, “As a manufacturer supporting oil and gas industries, we see a continual drawdown in supply as the number of active exploration is at an all-time low. When vaccines are released, there will be worldwide exuberance, driving unprecedented demand for energy.” This projection is driving his rating of business conditions from “weak” (at 2/10) to “very good” (8/10).
On the political front, many of the 606 CEOs participating in the survey say their optimism is reliant on the reelection of President Donald Trump or Republicans retaining the Senate and that a different outcome would downgrade their economic forecast due to fears of increased taxes and regulations.
Kenneth M. Green, owner and managing general partner of liquid feed manufacturer Agra Holdings LP, is among that group. He rates his outlook as “excellent” with a 9 out of 10, on the expectation that President Trump will be re-elected and a Covid vaccine will be on the market in the next quarter. “Any optimism taken from my responses should assume a Trump re-election and a Republican Senate,” he says. “Any drift to the left negates any optimism.”
Jim Ittenbach, CEO of Indiana-based marketing research firm SMARI, voices a similar sentiment. He says his “very good” rating of 7/10 regarding the state of business one year from now is driven by the belief that “the availability of a Covid vaccine will mitigate consumer anxiety and improve retail mobility,” he says, adding, however, that a change in administration at the national level would bring “additional uncertainty [that] may hinder corporate confidence going forward.”
Lanny Viegut, owner and CEO of Carnivore Meat Company, a Green-Bay, WI-based premium pet food manufacturer, says his outlook entirely rests on who gets elected in November. “If Trump, it’s a 10. If Biden, it’s a 4,” he says referring to our 1-10 rating scale. “We have grown 200% during the Trump years. Increased pay to our employees, re-invested in our operations and doubled our employees. I envision the Dem’s making it more difficult to run a successful company, higher taxes…more reg’s.”
Jim Evans, president and CEO of Sevan Multi-Site Solutions, a global provider of multi-site construction and program management based in Downers Grove, Illinois, says regardless of who wins in November, getting past the election is critical to bring more focus and clarity. “I believe that once the elections are over in November, there will be a lot more emphasis on back-to-work, regardless of the political outcome. Technology allows new breakthroughs in nearly every aspect of business, and the market is raring to go.”
He’s not alone in that perspective. Other CEOs also share in the belief that whatever happens in November, they are expecting less volatility once we get past the election.
In a continuing trend, the proportion of CEOs forecasting increases in profits and revenues for the year ahead has been increasing steadily since late Q2: in September, 59 and 62 percent, respectively, compared to 51 and 53 percent in August. Those numbers are up 176 and 145 percent respectively since their April lows.
Sejo Jahic, CEO of IT consulting firm ECHO Technology Solutions, says he is forecasting significant increases in profits and revenues that are entirely due to the pandemic. “The Covid-19 crisis forced us to rethink our operations, saving us a lot of money,” he says. “I see that happening with a lot of our clients and partners. The crisis pushed them into doing things that were avoided for a long time.”
Stan Bard, CEO of automotive servicing Fleet Refinishing in Southern California, says his positive projections are also derived from actions taken to navigate the crisis. “We are forced to be more creative and are finding incentives that are helping drive profit margins up,” he says.
We observe a similar trend when looking at the proportion of CEOs who anticipate increases in capital expenditures and hiring, 40 and 42 percent this month, respectively, up 136 and 140 percent since April.
Hiring projections are now back to January levels, as CEOs report having a greater ability to hire talent due to the improving economy and employees coming back to work. So much so that in certain parts of the U.S., the availability of talent has gone back to pre-Covid levels. Ed Vater, president of Osceola-based paddle maker Branches LLC, says finding workers is now a challenge.
“Unemployment is basically zero here in northwestern Wisconsin, and recruiting is nearly impossible at this point,” he says, noting that he nevertheless hopes to increase his workforce by up to 10 percent in the coming months. “Our revenue is entirely dependent on being able to find more employees. Automation is an option, but the corona surge will probably be over before we can implement much.”
John Gessert, president and CEO of American Plastic Toys, a Walled Lake, MI-based toy manufacturer, agrees hiring is currently difficult but primarily because of financial aid programs. “The government assistance programs are really hurting our hiring efforts,” he says.
Robert Peaslee, president of Manitowoc Grey Iron Foundry, a semi-production, conventional and automatic molding green sand foundry, agrees: “Limit the unemployment stimulus money,” he says. “Impossible to get people to even apply at my company. They can earn $1000.00 a week for not working in Wisconsin.”
In other sectors, such as Creative Dining Services CEO Jim Eickhoff’s food & beverage industry, the challenge with hiring is the unpredictability of operations as governments evaluate steps to reopen the economy. “Staffing will be HUGE issue to attract talent with open/close/open/close pattern of our dining services,” he says.
September data shows significant variations in CEOs’ outlook, with—unsurprisingly—Travel & Leisure CEOs feeling least optimistic in the business environment 12 months from now. At 6.1 out of 10, however, the sentiment is still within positive territory on our 1-10 scale.
On the optimistic front, Pharma CEOs are leading the pack, with assumptions based on the high probability of a vaccine being released by year end.
“As Covid-19 is more and more in the rear view mirror,” says one CEO in the sector, “we will return to growth and a very bright future with all the pent up demand in front of everyone.”
While company size (by annual revenues) plays a role in confidence levels, it is not as impactful as sectors. In September, data shows optimism across all size groups, in very similar proportions. In fact, all peer groups show more confidence in the future now than they did at the start of the year, with the greatest variation found among large-company ($1 billion+) CEOs, whose confidence has increased 22 percent since January.
“We are just starting to see our traditional customers come back,” says the CEO of a global large Wholesale Distribution company participating in the survey. “As we make progress on Covid, I would expect that group to do better.”
About the CEO Confidence Index
The CEO Confidence Index is America’s largest monthly survey of chief executives. Each month, Chief Executive surveys CEOs across America, at organizations of all types and sizes, to compile our CEO Confidence Index data. The Index tracks confidence in current and future business environments, based on CEOs’ observations of various economic and business components.