Chief Executive’s October polling of CEOs found confidence in both the current and future business environment stagnating amid heightened political and economic uncertainty at home and abroad.
CEO confidence in current business conditions remained relatively flat throughout the third quarter, and October is a continuation of this trend, with CEOs rating the economic climate at 6.8 out of 10 on our 1-10 scale. CEOs’ outlook for the next 12 months has been showing some sign of improvement—revenue and profit expectations rebounded in October after a steady decline through the third quarter—but despite having clawed back some of the steep August losses, our leading indicator remains 9 percent behind October 2018 levels and 7 percent below this year’s peak.
Note: Chief Executive’s CEO Confidence Index is measured on a scale of 1-10. October poll had 296 responses.
The reason? Overwhelmingly, CEOs we surveyed say Washington politics is ruining an otherwise positive climate for business. Solid consumer spending, low unemployment and declining interest rates, coupled with reduced regulations and lower taxes have been energizing companies across the country, but CEOs say they can’t take full advantage of it because they don’t know what’s around the corner. Thanks to this uncertainty, the proportion of CEOs expecting to increase their capital expenditures over the next year continues to hover at multi-year lows, at 46 percent.
Surveyed CEOs cite the upcoming presidential election, unresolved trade issues and continuous chatter about a looming recession as major hurdles preventing businesses from deploying cash, alongside fears of growing momentum for “socialist” programs among Democratic presidential candidates, which they say could have dire consequences for business.
“Politics [are] very draining,” says the CEO of a global enterprise who prefers to remain anonymous. “Add in the election, and you get very uneasy about how to position your company. We will adjust no matter who the president is, but Congress has just as big an influence with their constant impasse.”
“The Democrat-controlled U.S. House needs to stop wasting time on impeachment and get to business on passing USMCA and dealing with immigration,” says Robert Koch, chair of Koch Enterprises, an upper-middle-market global industrial manufacturer, who says the strike at GM, unsettled trade agreements and the House’s focus on impeachment have caused temporary business slowdown.
“A month ago, my assessment would have been higher,” explains the CEO of a professional services firm in the Northeast. “But the vengeful political climate (regardless of affiliation) is non-productive, harmful to business growth and looks to derail progress that has been made.”
Overall revenue and profit expectations are up from the month prior, although they remain far behind their earlier levels. Plans to increase headcount remain somewhat flat, with 46 percent of CEOs projecting to hire over the next 12 months, compared to 44 percent in September.
Wins and Losses Across Industries and Sizes
CEOs’ outlook for the year ahead has rebounded in October from the previous months, but it remains depressed across most industries and well below 2018 levels. For a second consecutive month, Transportation CEOs, often the first to be impacted by downturns in the economy, tellingly remain the least confident in the future, with a rating down 22 percent since the same time last year. Leaders in this sector say the roiled oil market is a big factor in their rating, in addition to political turmoil and uncertainty for 2020.
We observe a similar scenario when looking at CEO confidence by company size, with all groups down from 2018 levels but up from the month prior.
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.