Fears over Inflation Reverse Steady Confidence Gains for Small and Midsize Business Leadership

CEOs continue to invest and hire, but a possible trade war with China is fueling economic uncertainty, according to the latest Vistage CEO Confidence Index

SAN DIEGO, October 9, 2018 – The economic outlook of small and midsize business CEOs remains flat year-over-year, a stark contrast to a very optimistic Q4 2017, which set a fourteen-year peak as a result of tax cut legislation. This quarter, CEOs are anticipating slower economic growth and slight declines in overall profits and revenue, according to the Vistage CEO Confidence Index for Q3 2018. The latest Index shows average confidence levels at 103, a slight decrease from last quarter (104.1) and the same level as Q3 2017.

The slight drop in overall profits and revenue experienced in Q3 was largely driven by higher production costs due to higher wages, benefits, interest rates, and prices of materials. In fact, 47 percent of CEOs reported that they boosted wages or benefits in Q3.

“There is no denying that concerns about the emerging trade war with China and the cost implications of tariffs already being felt are having a dampening effect on CEO optimism. The growing economic uncertainty of rising interest rates, inflation and the hiring crisis is being felt by the small and midsize business world,” said Joe Galvin Chief Research Officer at Vistage. “CEOs are planning to move ahead with various expansion plans for their workforce and investments, but they remain cautious about the volatile economic landscape and what negative effects that could have on their bottom line. We’re working closely to help ensure Vistage SMB CEOs are prepared for what could happen next.”

Despite lower optimism, during the past four quarters, small and midsize business CEOs voiced the most expansive hiring plans in the past fifteen years. Nearly half of respondents (43 percent) said they plan to steadily increase their company’s total number of employees over the next twelve months. Planned increases in investment spending were also up year-over-year. In Q3, 50 percent planned to increase spending, up from 47 percent in the Q3 2017.

“Expected gains in revenues and profits, while at their lowest levels during the past year, were still quite positive,” said Dr. Richard Curtin, director of research at the University of Michigan, who analyzed the data. “Even with the recorded losses, the data continues to indicate a small but consistent shift toward higher expected growth rates in revenues in the year ahead.”

Additional findings from the Q3 2018 Vistage CEO Confidence Index, include:

• Economic Conditions
  • 64 percent of SMB firms believe current economic conditions have improved, yet 21 percent expect conditions to worsen over the next twelve months
  • 31 percent of SMB firms believe economic conditions have remained the same over the last year and 52 percent believe this will continue into next year
  • A quarter of respondents (25 percent) expect economic conditions to improve over the next twelve months
• Revenues and Profits
  • 75 percent of all SMB firms expect revenues to grow during the year, down slightly from last year’s 77 percent
    • 20 percent expect revenues to remain unchanged
  • 61 percent of CEOs of all firms anticipate profitability to improve, holding steady with last year’s 62 percent

Read the full results and view the infographic.

About the Vistage CEO Confidence Index
The Vistage CEO Confidence Index, established in 2003, is a quarterly survey of small- to mid-sized business CEOs, presidents, and business owners about the U.S. economy. The Q3 2018 Vistage CEO Confidence Index includes responses from 1,484 U.S. CEOs, surveyed between September 10 and September 17, 2018. Since its establishment in 2003, the Index has proven to be a reliable indicator for changes in GDP and employment, two to three quarters hence.

About Vistage Worldwide, Inc.
Vistage is the world’s largest CEO coaching and peer advisory organization for small and midsize businesses. For more than 65 years, we’ve been helping CEOs, business owners and key executives solve their greatest challenges through confidential peer groups and one-to-one executive coaching sessions. Today, more than 45,000 members in 35 countries rely on Vistage to help make better decisions for their companies, families and communities. The results prove it: Vistage CEO members grew their annual revenue on average by 4.6% in 2020, while nonmembers with comparable small and midsize businesses saw revenue decrease by 4.7%, according to a study of Dun & Bradstreet data. Learn more at vistage.com.

Media Contact
Katie McWeeney | Vistage
858.523.6875 | katie.mcweeney@vistage.com