CEO Confidence Ticks Up In August

Trump trade tactics play well with manufacturing CEOs
Strength in the overall economy, consumer confidence and the Trump administration’s pro-business agenda buoyed CEO confidence in August, even as worry persists about rising economic headwinds in the near future.

ceo confidenceStrength in the overall economy, consumer confidence and the Trump administration’s pro-business agenda buoyed CEO confidence in August, even as worry persists about rising economic headwinds in the near future.

Chief Executive’s August poll of 237 U.S. CEOs found confidence in future business conditions up 1.7%, to 7.14 out of 10, after ticking down in the prior two months. The year-to-date CEO Confidence Index average is up nearly one percent, to 7.27, which is well ahead of 2017 (7.08) but still below the 2004 Index of 7.47 — the strongest year on record. Confidence in current conditions also rose, up 1.9% in August at 7.69 out of 10 versus 7.55 in July.

“Nothing except government seems to be in the way of further good news,” said the CEO of a mid-sized industrial manufacturing company who is anticipating double-digit growth in revenue, capex and profits over the coming year, even as he plans to shrink his workforce significantly.

President Trump’s tariffs remain the main concern for U.S. business leaders who rely on foreign trade, and many other CEOs say they are keeping a close watch on the midterm elections and the prospect of a recession caused by what they perceive to be an overvalued stock market.

“While I expect business conditions to be favorable a year from now,” said the president and CEO of another mid-sized manufacturer, “I have a hard time believing business levels will remain as strong as they are at present time. Plus, if the midterm elections do not preserve the current majorities in the House and Senate, I fear there will be a lot of wrenches thrown into the economic machinery to undermine Trump’s reelection.”

Rising interest rates and low unemployment are also a growing concern. “Revenues are up, orders are setting records, but unemployment rates are hindering our ability to hire and expand,” said the CEO of a mid-sized commercial auto dealer.

Overall, eight out of 10 CEOs told Chief Executive they anticipate revenues to rise over the coming year, in line with last month’s findings. Breaking from July trends, 63% of CEOs say they now expect to add to their workforce within the next year — compared to 57% last month. A similar percentage said they predict an increase in their capital expenditures over the same period (versus 59% in July). An increase in those two areas could explain the slight drop in profit level predictions month over month, from 73% to 70%.

Year to date, expectations for growth are down across the board.

Outlook By Industry

An analysis of the August data by industry finds financial services CEO the most confident in their business outlook, with a rating of 7.75 out of 10 — an increase of nearly 10% since last month and 14% year over year.

Four weeks ago, this sector’s CEOs were telling us their confidence was beginning to unravel due to a potential recession looming on the horizon. Yet, this month, the focus was placed primarily on the benefits stemming from the rollback of regulations and a reduced tax burden. One chairman at a small company ranked his outlook for business conditions a perfect 10 out of 10, explaining that the tariffs should be viewed as a positive development, as “the foreign trade imbalances are being eliminated.”

In other sectors, confidence remains flat since the same time last year, and the range of opinions on where the economy is headed remains broad. The president of a mid-sized manufacturing company believes the future will be brighter than the current environment, despite admitting that the tariffs are beginning to impact prices and demand. “We’re seeing a softening in demand and people pushing requirements out into the future to see what the economy does.”

Outlook by Company Size 

CEOs of large firms showed the biggest confidence gains from the same time in 2017. All but three survey respondents told us this month that they are riding an optimistic wave due to federal tax cuts, regulatory relief and strong demand.

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.

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