CEO Confidence Dips Slightly But Remains Positive

Chief executives continue to be optimistic about the economy, according to the latest report by the Conference Board. Hiring plans are down, but remain positive overall. Here’s a closer look at the study and some predictions from leading executive recruiters.

July 12, 2018 – The Conference Board’s latest measure of CEO confidence, which had increased in the first quarter of 2018, declined slightly in the second quarter. The measure now reads 63, down from 65 in the first quarter of 2018. A reading of more than 50 points reflects more positive than negative responses.

“CEO Confidence declined slightly in the most recent quarter, but overall sentiment remains positive,” said Lynn Franco, director of economic indicators at the Conference Board. “CEOs’ optimism regarding the growth prospects for both mature and emerging economies have eased considerably since the beginning of the year. However, most CEOs expect profits will increase over the coming year, with market/demand growth and cost reductions the major driving forces.”

CEOs’ assessment of economic conditions was about the same as in the first quarter, with 74 percent saying conditions were better compared to six months ago. CEO sentiment was also virtually unchanged regarding current conditions in their own industries, with about 51 percent saying conditions were better than six months ago.

VP, Project Management Wanted at McGraw-Hill Education
You’ll be a key player in driving innovative processes that will impact its business objectives. You’ll be analytical to drive customer value, yet collaborative to build and motivate a high-performing team. Apply on Ezayo! 

Looking ahead, however, CEOs’ expectations about the economic outlook were much less optimistic than the previous quarter. Now, just 48 percent said they expected economic conditions to improve over the next six months, compared to 63 percent in the second quarter. CEOs’ expectations regarding short-term prospects in their own industries over the next six months were relatively flat, with only 42 percent anticipating an improvement in conditions.

Global Outlook

CEOs’ assessment of current conditions in the U.S. retreated slightly, but overall remains positive. Sentiment regarding Europe and Brazil declined rather sharply, with confidence regarding current conditions in Europe going from positive to neutral. In Brazil, sentiment went from positive to negative. Sentiment regarding India declined, although to a lesser extent, and remained cautiously positive. CEOs’ assessment of China and Japan was about the same as in the first quarter.

Worker Confidence Level Approaching Record High
American workers’ confidence is nearing its highest level ever and is continuing a year-long trend of positive progression, according to the national Worker Confidence Index from HRO Today Magazine and Yoh. The index gauges workers’ perceptions of the four key drivers of worker confidence. 

Looking ahead, CEOs were the most optimistic about short-term prospects for the U.S., though less so than in the first quarter of this year. Expectations for Europe declined from positive to neutral, while expectations regarding China Japan, and India ranged from neutral to slightly positive. Expectations for Brazil, however, turned slightly negative.

The Conference Board report also found that CEOs were optimistic about profit expectations for the next 12 months, with about 91 percent expecting profits to increase, compared to 71 percent last year. Executives in the durables industries were the most optimistic, with all expecting profits to increase. Close to nine out of 10 CEOs in the service industries and eight out of 10 in the nondurables industries expected an increase in profits.

Related: CEO Confidence Continues to Rise

Among chief executive officers who expected profits to rise, 62 percent said market/demand growth will be the primary driving force, while 15 percent cited cost reductions and a similar proportion citing price increases. New technology was cited by eight percent of CEOs as the primary source of improvement in profits, according to the Conference Board report.

Executive Recruiters Weigh In

In response to the downward trending sentiment in the report, Leslie Loveless, CEO of executive search firm Slone Partners, said that a number of factors come into play. Uncertainty and volatility around increasingly unpredictable and shifting federal regulatory environments are of concern, she said, along with fears about star-performing employee retention. “With extremely low unemployment numbers, it’s a bit naive for company leaders to think that their top people are not being courted by other top organizations for new opportunities,” said Ms. Loveless. “The past eight years have been a bull run, but now all CEOs are trying to predict when it might end. These three factors keep many CEOs awake at night.”

CEO Confidence Dips but Remains at Record High
Following a record high CEO outlook in Q1, the results of the newly released Business Roundtable ‘CEO Economic Outlook Survey’ reveal strong CEO plans for the coming months, but a modest decline in the overall economic outlook amid increased uncertainty surrounding government policies, particularly …

The sentiment about her own national organization, which recruits senior leadership for life sciences and diagnostics firms, is definitely positive. “We are seeing lots of dollars flowing in from capital sources eager to launch and support new companies,” said Ms. Loveless. “Investors want to quickly take advantage of startling medical advances, particularly in precision medicine, synthetic biology and personalized therapeutics.”

“Our outlook over the next 18 months is very positive, and we plan to hire additional executive search consultants to keep up with demand to place senior executives in these newly-funded high sciences and healthcare companies,” she said. “I feel great about this year and into 2019.”

“There is little argument that the American economy is doing very well; the stock market also seems to be showing surprising resilience shrugging off the beginning of the U.S. trade war with China, a signal that robust earnings are still besting politics, at least for the moment,” said Diversified Search CEO Dale Jones. “I do think the slight decline in CEO confidence is an indicator that there remains unease among the nation’s corporate leaders that a protracted trade war—not only with China, but with Europe, Canada, and Mexico—will most certainly impact economic growth, and quite possibly bring it to a halt sooner rather than later.”

“Tariffs matter. In my conversations with CEOs, there seems to still be a wait and see attitude, and a feeling that if the parties can actually be brought to the table to hammer out new trade agreements, it could end up being quite advantageous to the U.S.,” Mr. Jones said. “However, that is far from a done deal. CEO confidence is likely to further erode if some positive movement is not seen soon, particularly when it comes to the global economy, where the tumult over Brexit is weighing on investors. If there is one constant in the economy, it is that investors hate uncertainty more than anything else.”

Related: Worker Confidence Climbs, but Job Security Falters

Ralph DiPisa, partner at Hingham, MA-based search firm Phillips DiPisa, said that in his firm’s specialty area the stressors continue unabated. “More specifically to healthcare, this sector continues to wrestle with massive transformation and relentless pressures to contain costs,” he said. “The single biggest challenge to healthcare executives for the foreseeable future is identifying and hiring people with the right skills to compete in today’s complex environment.”

John Uprichard, president and CEO of Find Great People, said he was excited by the optimism surrounding overall growth in the economy. “Positive changes in the economy create a lot more demand for talent and that is what we have seen year over year with sustainable growth,” he said. “As the demand for talent increases, it is important for companies to understand how that drives some key variables in the market. We are going to see changes in availability of talent, greater competition for talent, wage escalation, higher acquisition costs and longer search cycles.”

Related: Confidence In Economy Resulting In Bullish Hiring Projections

Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; Stephen Sawicki, Managing Editor; and Andrew W. Mitchell, Managing Editor – Hunt Scanlon Media

Share This Article


Notify of
Inline Feedbacks
View all comments