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CEO Confidence Declined Slightly in the Second Quarter
05 Jul. 2018
The Conference Board 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 Q2, 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 current economic conditions was about the same as in the first quarter of 2018, with 74 percent saying conditions are better compared to six months ago. CEO sentiment was also virtually unchanged regarding the assessment of current conditions in their own industries, with about 51 percent saying conditions are better than six months ago.
Looking ahead, however, CEOs’ expectations regarding the economic outlook are much less optimistic than last quarter. Now, just 48 percent expect 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.
CEOs’ assessment of current conditions in the United States 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 remains cautiously positive. CEOs’ assessment of China and Japan remained about the same as in the first quarter.
Looking ahead, CEOs are the most optimistic about short-term prospects for the United States, 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 are neutral to slightly positive. Expectations for Brazil, however, have turned slightly negative.
Profit Expectations Improve Compared to 2017
CEOs are optimistic about profit expectations for the next twelve months, with about 91 percent expecting profits to increase, compared to 71 percent last year. Executives in the durables industries are the most optimistic, with all expecting profits to increase. Close to nine out of ten CEOs in the service industries and eight out of ten in the nondurables industries expect an increase in profits.
Among chief executive officers who expect profits to rise, 62 percent say market/demand growth will be the primary driving force, while 15 percent cite cost reductions and a similar proportion citing price increases. New technology is cited by 8 percent of CEOs as the primary source of improvement in profits.
Results are from surveys fielded from mid-May to mid-June
Source: CEO Confidence Survey Second Quarter 2018 / The Conference Board
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