Strategy

CEO Confidence Sinks to Five-Year Low

For the first time since the last quarter of 2001, gloomy responses from chief executives outnumber cheerful ones, according to the Conference Board.
Stephen TaubOctober 12, 2006

Chief executive officers are more pessimistic now than they have been in five years, according to the Conference Board. For the first time in half a decade, organization’s CEO Confidence Measure has dipped below 50, falling to 44 in the third quarter. That approaches the nadir hit in the final quarter of 2001, when the measure clocked in at 40.

This gloominess of chief executives mirror that of CFOs—a pessimism that’s at a five-year high, according to the most recent Duke University/CFO Business Outlook Survey.

For its part, the Conference Board’s CEO Measure, a quarterly survey that includes about 100 business leaders in a wide range of industries, had fallen to 50 in the second quarter of 2006. A reading of more than 50 points reflects more positive than negative responses.

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“The lack of confidence expressed by CEOs is a result of the recent slowdown in economic growth, combined with expectations that this lackluster pace of growth will carry over into the beginning months of 2007,” said Lynn Franco, director of The Conference Board Consumer Research Center.

Just 16 percent of CEOs claimed the current economic environment was improving as of the third quarter, down from about 27 percent in the second quarter, according to the business group. In assessing their own industries, about 28 percent said conditions were better in the third quarter, compared to 40 percent in the second.

CEOs are also less cheerful about the short-term outlook. As of the third quarter, only 16 percent of business leaders expected economic conditions to improve in the coming months, down from 21 percent the previous quarter.

Expectations for their own industries were also less positive. Twenty percent anticipated an improvement, while 31 percent were optimistic in the last quarter.