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CEOs Shrug Off Turmoil In Washington As Optimism For 2020 Continues To Rise

In spite of impeachment and ongoing tariffs, CEO confidence rises to the highest level recorded since last May.

Earlier this month a front-page story in the Wall Street Journal proclaimed CEOs were growing increasingly concerned about a 2020 recession. Based off a Conference Board poll of CEOs, the piece grabbed attention around the world, stoking hand-wringing in mainstream media outlets that the worst could be right around the corner.

So much for all that.

Chief Executive’s January polling of CEOs finds optimism in future business conditions on an upswing. At 6.7 out of 10, it is now at the highest level recorded since May 2019, when CEOs shrugged off a new round of tariffs and instead chose to focus on the positive: strong consumer sentiment, high job creation, continued deregulation and low interest rates. CEOs’ confidence in current business conditions also increased 4 percent month-over-month and is now at 7 out of 10, also back into “very good” territory according to our 1-10 scale.

Note: Chief Executive’s CEO Confidence Index is measured on a scale of 1-10. January poll had 225 responses.

Once again in January, CEOs cited the continued resilience of the U.S. economy—despite the disruption in Washington—as the main reason for their positive outlook for the next 12 months, adding stellar market performance and abundant opportunities to the list. Forty-six percent also say the Trump Administration’s Phase One trade agreement with China had a positive effect on their outlook.

That’s a very different story from the Conference Board numbers (which, to be fair, were based on a reading taken in September-October, when our polling also showed a real dip in optimism. The Conference Board also tends to focus on big-company CEOs—who also remain less optimistic in our polling than CEOs at companies of all sizes). Overall, business leaders we talked to for this month’s survey are a pretty happy lot right now.

Gregory Lee, managing partner at global executive search firm WorldBridge Partners, says our current “full-employment economy” is driving the momentum. “Anyone who wants a job has a job. Wage earners are fueling the economy through purchases of goods and services,” he says, however warning that the shortage of qualified people at every level has become acute as a result.

“Orders are up. Sales are up. Costs are flat. Money is cheap. Inflation is very low,” says the CEO of an upper-middle-market tech company, who says the Phase One trade deal with China has had a very positive effect on his outlook for 2020. “Let’s keep this going!” he says, noting that he anticipates revenues to be up more than 20 percent in the year ahead.

“We continue to see strong growth in sales and profits. New orders are strong for the first half of 2020,” says Scott Glaze, president, CEO and chair of medical device manufacturer Fort Wayne Metals. Although the Phase One deal didn’t affect his outlook for the year ahead, he notes that trade tensions, along with speculation of an economic downturn, do cast somewhat of a shadow on the positive aspects of this economy. He, nevertheless, expects 2020 business conditions to be “excellent”, with a 9 out of 10.

If there’s a shadow on all this optimism, it’s the Presidential election next November. As we saw in last month’s polling, many CEOs surveyed say the uncertainty about the potential outcome is the wild card in the economy, and is already impacting the way they’re planning for the year ahead.

“Election uncertainty and foreign trade policies [are] slowing down CapEx decisions,” says the CEO of an industrial manufacturing company, who, in fact, expects to decrease capital expenditures by up to 10 percent.

“Election year and congressional dysfunction will necessitate business caution and impact capital spending and investment projects,” says the president of a middle-market transportation company.

“Very hard to read the tea leaves right now. One of the most uncertain times I recall in my career,” says the CEO and president of an international manufacturer, who notes that the China trade war has been a huge cost for his company, “and it has achieved nothing.”

This uncertainty regarding what will come next may explain why the proportion of polled CEOs who expect an increase in revenues, hiring, profits and capex over the coming year remains relatively low when compared to the same time last year, at 67 percent, 42 percent, 64 percent and 47 percent, respectively.

Slicing Down the Data

When looking at the data from an industry perspective, most sectors remain down from their levels at the same time last year but show a healthy uptick on a month-over-month basis. Of those that broke from the upward trend, transportation CEOs (down 26 percent since the prior month) cite increased turmoil in the Middle East and overall uncertainty of current world events as reasons for their downgrade, while CEOs in the professional services industry who rated conditions as less than “Good” on our 1-10 scale say labor shortage is a major factor in their outlook.

A sectoral view allows show how tariffs have impacted CEO confidence differently across industries. While the majority view the Phase One agreement with a certain level of positivity, consumer manufacturing CEOs and those in the Travel & Leisure sector reported more negativity.

When looking at company size, CEOs at large companies ($1 billion + in revenues) show the least amount of confidence in the 2020 business conditions, down 9 percent since January 2019 and unchanged month over month. CEOs in that group say they are concerned with the length of the current cycle and slowing business investments.

All other groups show an improvement in confidence year over year, albeit to varying degrees, although small company CEOs (less than $10 million in revenues) are the only ones who have retreated this month, compared to December confidence levels. They say the lack of predictability in the results of the upcoming Presidential election, foreign trade policies and geopolitical matters, alongside a dampening economic outlook in some regions (notably California and Illinois, according to polled CEOs), are keeping them on edge.

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.


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