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CEO Optimism Slips In May On Supply Concerns, Washington Worries

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Chief Executive’s latest poll of U.S. CEOs finds that across sectors, sizes and states, unresolved supply chain issues, increasing raw material and labor costs, and looming tax increases are inhibiting CEO enthusiasm.  

America’s CEOs are still optimistic about a post-Covid boom, but the picture is increasingly tempered by concerns about overheated growth—and the potential for rising taxes.

Those are the key findings from Chief Executive’s latest poll of 238 U.S. CEOs, fielded from May 4-7. America’s business chiefs say they’re encouraged by the potential for Federal infrastructure investments, soaring consumer demand across sectors and the availability of cheap credit, but increasingly unfriendly business policy ideas from Washington, a lack of skilled labor and persistent issues in the supply chain are beginning to weigh heavily in the balance.

After reporting record-high optimism in April, CEOs pulled their business forecast back slightly in May, to 7.2 out of 10, on our 10-point scale, from 7.3 the month prior. This is the first time our leading indicator records a drop in confidence this year. CEO confidence in the current business environment remained unchanged since April, at 7 out of 10.

This is a change from last month’s record-high confidence of both CEOs and CFOs, who shared their outlook with our sister publication, StrategicCFO360.

“The availability of raw material is spotty, and some producers are also in the same predicament with obtaining raw materials. At this point, if we can’t get raw materials supplied, we may have to take a vacation until the supply becomes more stable,” says Guy Woods, CEO at Green Products Co, a consumer manufacturing company based out of California. He expects the business environment to remain the same over the course of the year, rating both current and future business conditions a 7/10.

Larry Parman, president of Oklahoma City-based law firm Parman & Easterday, says “inflation and across the board price increases (at the pump gas and lumber, for example), supply chains are locking up (chip shortages), tax increases and regulatory policies will start impacting businesses and consumers, cultural issues sowing seeds of distrust and discontent, and government policies suppressing workforce participation rates” are the main reasons why he believes business conditions will worsen over the next 12 months, from what he rates an 8/10 today to a 5/10 by this time next year.

Cindy Allen, CEO of StoneEagle, an automotive company based out of Texas, echoes her peers’ concerns over the supply chain but remains steadfast in recovery, rating both current and future business conditions an 8/10—or “very good” according to our scale.

“In our industry, automotive, we are facing a chip shortage that is limiting new vehicle inventory. Covid forced our industry to adapt to a more digital-forward interaction with consumers, the change that consumers have wanted but dealers have not been comfortable with until now,” she says, adding that M&A activity is on the rise and valuation multiples are stronger than they have been in a very long time, especially in retail automotive technology. “All this to say, while there are challenges, there are also many strong opportunities.”

She’s hardly alone in her bullish take. “The growth in the economy and low interest rates will motivate people to do more acquisitions,” says Luis Carrion, CEO of Coldwell Banker Alliance Realty’s office sales/investment advisory group. “The government continues to pump money into the economy and will continue to provide business financial assistance.” he’s expecting conditions to improve from a 7/10 now to an 8/10 by May 2022.

According to the survey, an increasing number of CEOs now expect business conditions to be unchanged by this time next year, up 7 percent since April. The proportion of CEOs who expect business conditions to worsen, 29 percent, has nearly doubled since February and is up 12 percent since April. Only 42 percent of CEOs polled in May now say they expect conditions to improve, down 9 percent since April.

The Year Ahead

Since a dip at the time of the presidential election last November, our research has shown a steadily growing number of CEOs forecasting increases in profits, revenues and hiring. In May, the proportion of CEOs projecting an increase in profits and revenues by this time next year is up 1 and 6 percent, respectively from April, to 80 and 88 percent. This is the highest proportion of CEOs projecting increases in profits and revenues since the beginning of 2018, when the former administration announced corporate tax cuts.


Two-thirds (68 percent) of CEOs polled in May say they plan to increase hiring over the coming months, up 2 percent since the month prior—the highest percentage since 2013.

The majority of CEOs polled say they are planning to increase capital expenditures over the coming year, although that number is 5 percent lower than last month.

Sector & Size View

This month, CEOs in only two industries reported an increase in confidence: advertising and industrial manufacturing, up 2 and 3 percent, respectively. The outlook for CEOs across all other industries either stalled or slipped.

The largest reported decline was in the transportation sector, down 17 percent. Richard E Durst, CEO of Arctic Express, says labor is the main issue. “Our customers are very busy, but we are struggling to find enough drivers to fill our trucks and meet our commitments to our customers,” he says. “If our trucks were full, I would rate conditions as excellent.”

Year over year, however, CEOs across nearly all industries are reporting a more favorable outlook—unsurprisingly considering the crisis we all faced at this time last year. CEOs in wholesale/distribution have improved their outlook the most, ranking conditions a year from now 24 percent higher than they did in May of 2020.

Construction CEOs are the only cohort to report a decrease in confidence year-over-year, down 3 percent since April 2020. They say a labor and material shortage, increasing costs on both labor and material, higher taxes and fears of inflation are the main reasons for this rating.

Forecasts by size reveal a similar pattern this month, and all size ranges under $1 billion reported a decline in confidence in business conditions 12 months out. Although across company sizes, CEOs remain fairly optimistic that vaccines will open up the economy, they are increasingly concerned over inflation and government policies affecting how they conduct business.

Year over year, data shows that CEOs in mid- to large-size companies have gained optimism at double-digit rates. The exception is CEOs in companies with revenues under $10 million in revenue who have little changed their outlook since last May, who saw a 2 percent decline in their confidence.

Regional View

Looking at business confidence by region, we see that 4 out of our 11 most-represented states have increased their confidence in future business conditions: Connecticut, Illinois, Indiana and Pennsylvania. CEOs from those states all mention that pent-up demand is driving their positivity.

In Michigan, CEOs reported a 31 percent drop in confidence and largely attributed their concerns to the rising cost of raw materials. CEOs in Pennsylvania, who gained the most confidence, 17 percent, are looking forward to more consumer spending.

And although the confidence of CEOs in Indiana has grown by 14 percent since last month, they are still the most pessimistic, retaining their spot from April. Mike Kirby, CEO and President of Performance Group, a financial services company in Indiana lists the reasons why he thinks conditions will worsen from a 5/10 now to a 4/10 in the future: “Inventory and supply chain issues and inflation pressure.”

Topping our list are the CEOs in Connecticut, who are thrilled about the availability of cheap capital and more businesses opening every day.

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. For additional information about the Index and prior months data, visit


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