CEO Confidence Plunges at Record Rate - March 2008
SAN DIEGO (March 6, 2008) — Concerns about a slowing economy and fears of a recession have pushed the Q1 2008 Vistage CEO Confidence Index to a five-year low of 72.0. Of the nearly 2,300 CEOs surveyed, almost half think the economy has already entered a recession and only 14 percent expect the economy to improve within a year. While chief executives of small- and mid-sized businesses are cutting business investments at a record rate, 83 percent of the CEOs say they will not cut jobs.
A quarterly measure of economic, market, and industry trends, the national Vistage CEO Confidence Index dropped four points from the fourth quarter 2007 survey and more than 20 points from the Index of 95.4 recorded a year ago.
“For the first time, the economy has replaced staffing as the top concern for business leaders,” says Richard Curtin, Ph.D., a consultant for the Vistage CEO Confidence Index and director of consumer surveys at the Universityof Michigan in Ann Arbor. “Only 14 percent of CEOs expect the U.S. economy to improve in the next 12 months.”
Firms are reacting to the worsening economy by adding to their cash reserves, reducing costs, and mounting new marketing initiatives to expand their target markets.
“There is some comfort in this survey,” says Rafael Pastor, Vistage chairman of the board and chief executive officer. “CEOs are not cutting jobs as their first reaction to this economic news. Instead they are looking at other options such as increasing marketing initiatives, doing business internationally and decreasing spending. They see their people as a valuable asset and necessary to weather this economic storm.”
Weaker Revenues and Profit
CEO expectations for revenue growth are down from last year, when 75 percent of business leaders predicted revenues would increase. Today, 63 percent of chief executives anticipate an increase in revenues and 13 percent expect revenues to decline, due to rising costs and consumer resistance to price increases. For the first time in five years, fewer than half of all firms expected increases in overall profits, and one-in-five firms anticipate declines in their profits in 2008.
Investment Plans Wither as Credit Tightens
Twenty-two percent of all firms plan to decrease their investment spending in the next year, even while the Federal Reserve has aggressively lowered interest rates. The majority of firms say interest rate cuts have not made it easier for them to borrow money and fund their companies. Just 63 percent of U.S. businesses anticipate revenue growth in the coming year.
Staff Reductions the Last Resort
Despite the declining economy, CEOs are reluctant to reduce their staff, and 47 percent plan to add to their total number of employees in the next 12 months. Business leaders identify attracting, training and retaining qualified employees as the best way to grow their businesses. Nonetheless, one-in-eight firms intend to decrease their staff as an unavoidable adjustment to the U.S. economic slowdown.
Marketing Critical to Continued Growth
As competition for consumer spending increases, nearly 60 percent of CEOs plan to expand marketing initiatives to ensure the viability of their companies. As the most frequently identified adjustment to the current or impending recession, more CEOs are increasing marketing than saving cash, reducing employees, or selling off products or services.
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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 Q1 2008 Vistage CEO Confidence Index is a compilation of responses from 2,287 CEOs of small- to mid-sized companies, surveyed Feb. 11- 20, 2008, with a margin of error of 1.7 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 more than 14,000 members in 16 countries. Vistage members generate nearly $300 billion in annual revenue and have more than 1.8 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 is headquartered in the United States and has foreign operations in the United Kingdom, Ireland, China, Mexico and the Netherlands. Vistage International has foreign affiliates who operate under the Vistage brand in Argentina, Brazil, Chile and South Africa. Other Vistage affiliates operate as TEC, The Executive Committee or The Executive Connection in the following areas: Florida, Michigan, Wisconsin, Australia, Canada, Germany, Malaysia, New Zealand and Singapore.
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