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After Plunging In December, CEO Outlook For 2019 Ticks Up In January

After plunging to a two-year low in December, CEO confidence in future business conditions ticked up 2.5% in January to 6.6 out of 10, from 6.4 out of 10 in December.

After plunging to a two-year low in December, CEO confidence in future business conditions ticked up 2.5% in January to 6.6 out of 10, from 6.4 out of 10 in December.After plunging to a two-year low in December, CEO confidence in future business conditions ticked up 2.5% in January to 6.6 out of 10, from 6.4 out of 10 in December. While this rating is 13% lower than where it was in January 2018—when it hit a peak of 7.6, after new corporate tax cuts fueled optimism—it nevertheless indicates that the majority of CEOs polled haven’t let the longest government shutdown in U.S. history or the warnings of a potential economic downturn deter their plans, at least so far.

Note: Chief Executive’s CEO Confidence Index is measured on a scale of 1-10. January poll had 365 responses.

This outlook is also reflected in our monthly gauge of CEO confidence in current business conditions, which increased 1% in January, to 7.2 out of 10, scoring within “very good” territory on our 1-10 scale.

The majority of the CEOs surveyed say the strength of basic economic indicators (low unemployment, wage growth, consumer demand, effects of tax cuts, etc.) are, for the most part, counterbalancing the effects of political uncertainty, tariffs and rising interest rates.

“Companies that are well positioned for adverse economic conditions can really get a head-start on economic recovery to create enduring value,” says Ron Kirscht, president of Donnelly Custom Manufacturing, a mid-size industrial manufacturing company in Minnesota. He rates his confidence in the current environment a 9 out of 10 but downgrades it to a 6 when looking at the next 12 months. “Given the nature of economic cycles,” says Kirscht, “we are due for a softening.”

While most of the 365 CEOs polled in January agree that the length of the current business cycle is calling for a downturn, the great majority (79%) don’t expect an outright recession in 2019, but 52% say they do expect a slowdown from current growth levels.

“Business in my sector is the best it has been in decades. Let’s not talk ourselves into this recession,” says Bob Grote, CEO of Ohio-based pizza equipment manufacturer, Grote Company.

Despite the forecast of a slowdown, 59% of the chief executives in our survey say they are planning to increase their capital expenditures in the year ahead, up from 53% last month. While that level remains below the 2018 average of 63%, this month’s upturn indicates that the majority of businesses don’t anticipate being derailed by softening growth. In fact, 54% say they don’t plan to make any adjustments to their growth plan in preparation for the 2019 economy.

“There is a knee-jerk reaction going on with the trade war and Fed adjustments, but in general, business conditions are better than OK,” said a partner at a small professional services firm who expects his company’s revenues, profits and capex to increase in 2019.

“There are no indications from our key clients of a slowdown,” said the CEO of an upper middle market wholesale/distribution company who rates his confidence in 2019 conditions above average with an 8 out of 10.

“The slowdown that we were expecting to occur at the end of the year is not materializing,” said the CEO of a small tech-enabled business services firm. “This is based on our customers’ conversations, new business entering the pipeline and an increasing number of customers upgrading from monthly to annual subscriptions, reflecting both greater confidence in their own businesses and a growing concern of price increases.”

In the end, three-quarters (75%) of the CEOs in our survey say they anticipate their company’s profits to rise in 2019. The figure is similar for revenue (74% of those polled). Both of those represent increases (5% and 1% respectively) since last month.

The number of CEOs expecting to add to their workforce is the only measure that has decreased month-over-month, from 57% in December to 55% in January, as 19% of polled CEOs say they are planning to freeze or limit hiring in 2019.


When looking at CEO confidence in future business conditions by industry, January ratings were mixed, with month-over-month increases among transportation, financial services and manufacturing CEOs, while wholesale/distribution, professional services, tech and construction CEOs reported feeling less optimistic than the month prior.

“Our worldwide air cargo support business has strong long-term strategic underpinnings for continuing growth, including e-commerce,” says Steve Townes, chairman and CEO of ACL Airshop and founder of Ranger Aerospace who also rates future conditions an 8 out of 10 and expects growth on all fronts.

Despite the optimism, year-over-year confidence levels remain very much in the red across all industries, mainly due to political uncertainty, a rising debt level among both consumers and businesses, ongoing trade disruptions and the constant chatter over a possible recession.

Looking at companies by size (in terms of annual revenue), we observed a disconnect between mid-sized companies and their small and large counterparts.

Confidence in small (less than $10M) and large company ($1B+) CEOs is down 1.9% and 2.2%, respectively, since December, while mid-sized company CEOs ($10M–$999.9M) confidence is up 4.8%—and up 7.6% for upper middle-market ($100M–$999.9M) CEOs. The difference between the most and least optimistic groups is 12.9%, which is a significant differential.

This may be explained by the fact that among the upper middle-market respondents, 42.9% are manufacturers, a sector where CEOs tell us demand is strong and that the main concern lies in Washington, not with economic indicators.

“The economy heated up with the expectations of a new president and congress getting Washington back on the side of the businessman; it did not happen and now, gridlock,” says Jim King Jr, CEO of Illinois-based manufacturer, The IFH Group. He, nevertheless, rates business conditions 12 months from now an 8 out of 10, also expecting revenue, profits, capex and headcount to increase in 2019.

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. The Index tracks confidence in current and future business environments, based on CEOs’ observations of various economic and business components. The results are used as key indicators by media outlets throughout the world.


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