CEO Confidence Hits All-Time Low: Index Shows Decline Amid Financial Market Turmoil
SAN DIEGO (Sept. 6, 2007) — Confidence in the U.S. economy continues to slide, according to the latest Vistage CEO Confidence Index. Chief executives of small- and mid-sized businesses are becoming increasingly concerned about the turmoil in financial markets and the effects it may have on their businesses. In Q3 2007, the Vistage CEO Confidence Index fell to 81.4, the lowest it has been since the survey began in 2003.
A quarterly measure of economic, market and industry trends, the Index dropped nine points, down from 90.5 in the prior quarter and 89.3 a year ago. Comparatively, when the Index was first created, confidence was measured at 100.0 in Q2 2003 and 108.7 in Q3 2003.
"Of the 2,103 business leaders surveyed, the concern is not only about the economy, but also about the availability and cost of credit to their companies," says Richard Curtin, Ph.D., a consultant for the Vistage CEO Confidence Index and director of consumer surveys at the University of Michigan at Ann Arbor. "Because of this, executives plan to put some of their planned investments on hold for the remainder of the year."
Overall, the survey indicates business leaders expect a slowdown, but not a turndown in the economy. Companies still expect strong growth in their revenues, and have no plans to cut payroll. Just like the prior quarter, recruiting and retaining talent is the most important challenge executives face, although uncertainty about the economy may also slow hiring.
"CEOs are expressing guarded optimism that their companies are in a position to withstand the stiffer headwinds from the credit storm," says Rafael Pastor, Vistage chairman of the board and CEO. "As well, our members are resistant to staff downsizing, which is a clear indication they have not adopted a pessimistic view. They’re simply becoming more cautious in their plans."
Despite the sharp decline in confidence, the majority of business leaders (59 percent) did not think the economy would worsen any more this year.
Slower Growth in Revenues and Profits
Two-thirds of all firms anticipate an increase in revenues during the third quarter, which is slightly below last year’s reading. Higher profits are expected by 55 percent of all firms in Q3, just below 59 percent in the prior quarter and 57 percent from a year ago. These projections were noted by CEOs despite the fact that half of all firms thought falling home prices and more costly mortgages would have a negative effect on their businesses. Firms report a decline in their ability to increase prices even as their costs for labor and energy have increased, making increased efficiency a key to
profit growth.
Credit Crunch Hits Investment Plans
Increases in fixed investments were planned by 40 percent of all firms in Q3, down from 45 percent a year ago. Although this was the lowest level recorded in the past four years, just 17 percent of CEOs indicated they would actually reduce the level of their fixed investments.
Finding Qualified Staff and Resisting Staff Reductions
One-third of all firms noted finding and retaining qualified staff is still the most significant problem they face. Overall 53 percent of all firms reported they planned to increase the number of their employees in Q3.
|
 |
|
 |
About the Vistage Confidence Index
U.S. small and mid-sized businesses represent the most vital component of the nation's economy. This sector creates 75 percent of all new jobs and generates 50 percent of all national revenue. The opinions of these business leaders provide a clear snapshot of current economic, market and industry trends and demonstrate their plans for growth over the next 12 months. These insights provide a leading indicator for employment, capital expenditure, sales and revenue trends.
The Q3 2007 Vistage CEO Confidence Index is a compilation of responses from 2,103 CEOs of small- to mid-sized companies, surveyed August 16-24, 2007, with a margin of error of 1.8 percentage points. The Vistage CEO Confidence Index is the only comprehensive report of their opinions and projections.
about Vistage International
Vistage International and its affiliates have 14,000 members in 16 countries representing the world’s leading chief executive organization based on revenue. Vistage members generate nearly $300 billion in annual revenue and have more than 2.1 million employees around the world. Vistage is dedicated to increasing the effectiveness and enhancing the lives of chief executives. Member companies are better run and grow their revenues, on average, at twice the percentage growth rate after joining Vistage.
Vistage International includes operations in the United States, the United Kingdom, Ireland, China, Mexico, Argentina and the Netherlands. Vistage affiliates include TEC, The Executive Committee and The Executive Connection in the following areas: Florida, Michigan, Wisconsin, Australia, Brazil, Canada, Chile, Germany, Malaysia, New Zealand, Singapore and South Africa.
media contact:
Gini Dietrich
Arment Dietrich, Inc.
312.787.7249
gdietrich@armentdietrich.com
Tony Vignieri
Vistage International
858.509.5882
tony.vignieri@vistage.com