February 2017: Are CEOs Getting Nervous?

Is it a blip or the start of a trend? Only time will tell, but after a solid three-month incline (November-January), CEOs’ confidence about overall future business conditions (12 months from now) seems to have flattened out compared with the three months after Donald Trump was elected. February’s 6.99 rating is a slight 1.1% drop from January’s 7.07, on a 10-point scale with 10 being the highest.

Concerns are starting to rise to the surface. One CEO told ChiefExecutive.net “I believe that the new president and cabinet will create an unstable business and economic climate for the foreseeable future. The outcome will likely be negative for world trade, and for the U.S. economy as well.”

Another said, “The uncertainty associated with the administration’s “tweets” and its radical and arrogant approach to matters (I am paraphrasing, “like it or leave”, “it is what it is”, “get used to it” do not inspire me and others to be confident about the future. And then, there is the issue of a totally inexperienced president who appears to want to operate as if he is a “dictator”. I think all of these actions and others as well bode very seriously on our economic future.”

Even some of his supporters are beginning to worry. “Very supportive of making America great again,” still another said, “but concerned about a blanket nuclear policy that will have unintended consequences, therefore cautious about how this policy will be implemented, particularly if there is not a good understanding of how it will impact businesses that will make America great again.”

Mid-market business leaders, however, continue to have a strong outlook, with a rating of 7.2, compared to just 6.6 for their larger counterparts, and 6.8 for leaders of small businesses.

Revenue growth looks positive for the future

Despite their worries, CEOs still are forecasting a good year. Fully 84.4% of respondents anticipate revenue growth over the next 12 months. Of that, 45.7% expect revenues to increase between 1 and 9.9%, 25.7% expect growth of 10% to 19.9%, and 13.0% expect growth over 20%.

Three industries—pharmaceuticals/medical products, consumer goods manufacturing and real estate—reported the highest overall revenue expectations, with 100% of respondents in these categories projecting at least some revenue growth. Of all sectors, however, it’s the high tech industry that anticipates the highest revenue growth, with 35.5% of respondents projecting growth above 20% within 12 months, followed by healthcare with 25.5% and real estate, with 20.0% projecting revenue gains of more than 20%.

The government/nonprofit industry anticipated the most reductions in revenue, with 40.0% of respondents saying they expect revenue to go down (20.0% said less than 10% and 20.0% between 10% and 19.9%). This is followed by the transportation/rail industry with 33.3% saying they anticipate a reduction of less than 10% in revenue by the end of the year. Twenty-five percent of respondents in the healthcare and advertising/marketing/entertainment/media industries said the same.

Those who anticipate revenue growth are likely expecting to benefit from reductions of tax regulations and renegotiated trade agreements, while those who anticipate lower revenues may be anticipating a setback from the elimination of existing trade agreements, among other issues.