CEO Confidence Remains Solid In March, But Trails 2018 Levels

Chief Executive’s most recent reading of CEO confidence in current business conditions remains flat month-over-month, at 7.3 out of 10, while confidence in future conditions decreased slightly to 6.7/10, from 6.8 in February.

ceo confidenceCEO confidence in current and future business conditions remained solid in March, but continues to trail the highs of 2018.

Chief Executive’s most recent reading of CEO confidence in current business conditions remains flat month-over-month, at 7.3 out of 10, while confidence in future conditions decreased slightly to 6.7/10, from 6.8 in February.

On a quarterly basis, confidence in current conditions has weakened by 4% compared to the first quarter of 2018, while confidence in future conditions has dropped 10% over the same period last year.

CEOs who responded to our survey say low inflation, the 2017 tax reform benefits, the rollback of regulations and stable interest rates are all big contributors to their positive outlook, but unresolved trade issues, concerns about overvaluations in the stock market and the trajectory of the global economy continue to restrain their confidence in business conditions 12 months from now.

Note: Chief Executive’s CEO Confidence Index is measured on a scale of 1-10. March poll had 228 responses.

“The economic expansion appears to be tiring and a leveling off would be expected”, says Jason Meyerhoeffer, president and CEO of First Federal Savings Bank. “The impact of interest rate increases will begin working through the economy, as will tariffs, weak ag commodity prices, etc.” For those reasons, he rates both current and future business conditions “very good” with ratings of 8/10 and 7/10 respectively.

“Natural economic cycles tend to occur, so at some point we’ll see an economic softening, and we’re probably due for one,” says the president of a mid-sized industrial manufacturing company in Minnesota. He rates current conditions a 9 out of 10 but downgrades them to a 7 when looking at the next 12 months due to the political battles in Washington, which he describes as “textbook conditions for an economic downturn.”

He’s not the only one keeping a close eye on Washington. “The economy is humming, but with the change in the House, it could have an impact over the next year,” says the CEO and president of a mid-tier technology company who also rated his 12-month outlook slightly lower than the current conditions, at 8/10 vs. 9/10.

Against the potential slowing of the economy, the proportion of CEOs expecting revenues to rise over the next 12 months has decreased from 79% in February to 71% in March, the lowest level it has been since October 2016.

The number of CEOs forecasting increases in capital expenditures, profits and employees has also decreased significantly across the board. In March, 54% of CEOs said they expect an increase in capex (back to near-December levels from 62% in February), 68% expect an increase in profits (its lowest level since November 2016, from 74% February), and 49% expect an increase in headcount (a low since July 2017, from 56% in February).



In March, there were great discrepancies in confidence within industry peer groups. CEOs who spoke with us were divided on what would drive the outlook 12 months from now. After being one of the only sectors to retreat in February, construction/engineering/mining CEOs were one of the few to record an increase in confidence this month. They tell us low interest rates, low energy costs and the growing need for infrastructure are catalysts to their sector’s growth, strengthening their 12-month outlook.

Manufacturing CEOs are also showing an increase in confidence, essentially due to resolving trade disputes. David Cox, CEO of machining manufacturer The Bradbury Group, who rates the current environment a perfect 10 out of 10 and gives the next 12 months a rating of 8, says that while he anticipates a slowdown in Q4 2019 and Q1 2020, “the economy is doing well and growing consistently, and I expect to see a China-US trade deal soon,” he says.

Construction CEOs are also the only ones to show an increase in confidence year-over-year, +7%.

Looking at companies by size (in terms of annual revenue), once again this month, small and large company CEO confidence is moving counter to that of mid-market CEOs. After having been up 7% and 6% in February, respectively, they are now down 6% and 3%. Meanwhile, mid-sized company CEOs are showing an uptick in confidence this month, after a decline in February.

On a year-over-year basis, large company CEOs are now the only group to post a gain in confidence—albeit nominal.

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 corporate 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. The results are used as key indicators by media outlets throughout the world.

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