CEO Confidence Rises Slightly Despite Ongoing Uncertainty Surrounding Presidential Election

The CEO Confidence Index, Chief Executive‘s monthly gauge of CEO expectations for overall business conditions over the next twelve months, rose 2.5% in September to 5.47 from August’s 5.34, out of a possible 10. It remains 9.3% below the 2012 high of 6.03 in February; August’s confidence index was the lowest so far this year.

CEOs of the largest companies (greater than $1 billion in revenue last year), with a mean confidence of 5.21, were 5.5% less confident about future business conditions and, at 4.46, were 7.6% less confident about current business conditions than CEOs of other companies.

CEOs of the smallest companies (less than $5 million in revenue last year) had higher confidence than their larger-company counterparts, despite citing generally less rosy prospects for growth within their companies. This is the reverse of the last month’s trend, which saw smaller companies out-doubting larger ones.

CEOs of companies with between $50 to $100 million in revenue were more optimistic than any other size bracket, with a CEO Confidence Index of 6.00 and a Current Confidence Index of 5.16, respectively 9.6% and 6.8% above the overall means.

Comments from survey respondents show that uncertainty surrounding the outcome of the presidential election is still heavily influencing business decisions. “Who is elected President will have a dramatic negative or positive impact on the business climate, the sustainability of our economic system, and the probability of a financial default by America,” wrote the CEO of a small professional services firm. “Our planning is on hold until we know who is President and whether to plan for closing the business, survival, or expansion.”

Most were more explicit in their condemnation of the current administration. “We are suffering from the most anti-business regime in our lifetime,” wrote Gary Shapiro of the Consumer Electronics Association, “and it is stalling the recovery as every business faces onerous rules, uncertain taxes and a hostile government. If Romney wins, everything changes and jobs are created as businesses and government will stop being enemies.”

The vast majority of CEOs surveyed in September were more optimistic about future conditions than about present conditions, continuing a trend that has lasted 18 months. From Chief Executive‘s first CEO Confidence Index measurement in October 2002 up until June 2009, mean assessments of current business conditions were consistently higher than their forward-looking counterparts. The years 2009 to 2011, the first of the current administration, were a transition period for future expectations.

In another measure of how much politics matters to chief executives’ business plans, the overall economy was rated among a variety of issues as by far the most important in deciding for whom to vote. One respondent from a midsized wholesale firm summed up what seemed to be common sentiment by writing that the U.S. government “needs to focus on the things that improve our overall business climate first. Abortion, gun control, global warming, and same sex marriage do nothing to improve our economic environment.”

Good news for job seekers: just 18.4% of respondents said they foresee reductions in employees at their companies over the next 12 months, while twice as many said they foresee an increase. This metric is up from the previous month, which showed 21.1% anticipating decreases and just 33.6% looking forward to increases.

On the other hand, 54.6% of CEOs said they anticipate a profit increase within their companies over the next 12 months, a 2.1% drop from last month, and 24.0% said they anticipate a profit decrease, a 2.0% rise from last month. 12-month revenue expectations are also somewhat lower this month.

Selected Comments from CEO Survey Respondents

“We see an onslaught of rules, regulations, taxes and fees coming. We cannot afford to lead in passing through these costs to the customer. Therefore, we must hunker down and wait for ‘the big boys’ to surprise their customers with a series of increases. We will trail behind.”

“Uncertainty over political, regulatory, tax and economic conditions is helping to freeze actions in the marketplace. Government programs in healthcare and other areas are producing counterintuitive changes (e.g., producing fewer physicians, more expensive procedures and diversified strategies) rather than solving the actual problems.”

“Economies thrive when there is predictibility. Uncertainty kills jobs and business investment. The federal government needs to enact tax, immigration, spending, social security and health care reforms that promote predictability for businesses and consumers.”

“If Romney is elected (which I’m sure will happen), then put the marks at 10. If by all strange things there are enough numbskulls to re-elect obama, then I would put the marks at 1! A President who is a specialist in turn-arounds in business is what we desparately need, before every business goes under and no one has a job, except government workers.”

“Government needs to provide safety and a secure environment for its citizens. Other than that it should stay out of the way and let the private sector operate and the market determine the winners and losers.”

“Have to think more about the sustainability of our national economy in strategic terms – deficits, debt, energy independence – and less about short term tactical topics and selfish personal interests.”

“We will continue to add temporary employees until we understand the implications and costs associated with the new healthcare law.”

“As my company sells medical devices we are very concerned what impact the 2.5% medical device tax will have on overall business.”

“Health care costs are a high priority. Legislation has an impact on cost, but not as much as addressing cost directly. The healthcare system is dysfunctional and directly impacts employment.”

“As an independent, I will be voting against Obama, vs. for Romney. We need someone who is less likely to screw up free enterprise with regulations.”

“We need a significant change in Washington DC, and a focus on energy independence, an improved business, less regulation, and living within our means. In my opinion, even Romney/Ryan’s proposals are not attacking deficits and debt at an adequate pace!”

“The economy, jobs and the deficit are the most important and the basis to get the country righted. The rest of the items are important, but you need a strong foundation first. Like a train, fix the locomotive and the rest of the cars will follow.”

“It’s about the economy. The rest is just white noise.”

“The odds on our survival as a free enterprise nation is now $16 trillion to one. When 48% of our citizens are taking from government what 52% create, we are near the tipping point of no return.”

“The Tea Party and Occupy Wall Street are closer than they imagine because they both manifest a lack of trust in institutions. Without trust, we are toast.”

“I’m bothered that Gov. Mitt Romney has to answer to the conservative base of the party and change certain political positions he formerly held. I think his experiences have made him cold to the realities of the needs of the middle class and it appears to me he is looking after the 1% much to the stereotype the party has developed.”

“My personal net worth has dropped by 50% in the last 2 years and my retirement plans went from soon to sometime in the distant future. Ready for a change!”

“I am greatly disturbed by watching our leadership stand in front of the camera and lie!”

“The problem is not the Chief Executive (President Obama or a President Romney) but rather the acidic tone in Washington that is being spewed by an obstructionist do nothing Congress. Congress is the real problem with our nation’s political process.”

“As a sidenote, the CEOs of this country are still the greatest. As an example this country’s CEOs are to be commended for their technological ability to fly and safely land the Mars rover, Curiosity. This was a great achievement for a very complicated mission, and they did it right the first time. This shows Washington what can be accomplished with great teamwork and leadership.”

CEO Confidence Index — September 2012

Respondents: 334

What do you expect overall business conditions to be like one year from now on a 1 -10 scale? (10 = Excellent)

What is your assessment of current overall business conditions on a 1-10 scale? (10 = Excellent)

Over the next 12 months, what changes do you forecast for your firm compared to the past 12 months?