Nearly 25% of CEOs Expect Drop in Profits and Cap Ex This Year

The CEO Confidence Index, Chief Executive’s monthly gauge of CEOs’ perceptions of overall business conditions, has followed a steady downward trajectory throughout the spring and summer of this year.  September continued the negative trend; the index reached a new low of 4.88 out of a possible 10. This has been a 23.6 percent drop since the Index’s 2011 high of 6.39 in February. Only 31.4 percent of chief executives expect business conditions to be at least ‘good’ over the next year.  This 30.7 percent drop from August’s 45.3 percent is a huge loss in CEO confidence in the overall health of American business.

Politics have taken center stage in the American economy and we can expect them to remain this way through next year’s presidential election.  Time and time again, CEOs have expressed their disapproval of the Obama administration and its ability to pull the country out of this economic downturn.  As one CEO said, “We’ve worked hard to trim our staff and we’ll continue doing so for at least the next year.  And probably longer with this administration. And there is no trick they can play to get us to hire.”

Less than 30 percent of businesses expect to increase hiring over the next year, and of those who will increase their workforce, 67 percent expect to do so by less than 10 percent.  While most CEOs aren’t expecting strong growth, they also aren’t expecting serious decline.

It seems that roughly a quarter of CEOs are expecting a decline in important business benchmarks: 18.6 percent expect to see a decrease in revenues, 25. 6 percent expect to see a decrease in profits, 22.5 percent expect to decrease their capital expenditures, and 23.8 percent expect to downsize their workforces.

One of our polled CEOs noted that his company’s capital expenditures, which will remain unchanged, have been essentially zero for the past three years. One CEO discussed the tense business climate, “From my company’s point of view, there is a great deal of fear in the air. We are trying to raise investment capital and investors are scared about the environment.” As another said, “Small customers lack confidence and are reluctant to make major capital expenditures. The rise in fuel prices has impacted people’s purchasing practices and has inflated the price of virtually all goods.”

Many CEOs shared the sentiment of one CEO who told us, “I’ve never seen such a mess as we have right now.”

CEO Confidence Index — September2011

Respondents: 247

What do 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?