The Conference Board’s measure of chief executive confidence declined further in the third quarter. The measure now stands at 42, versus 55 in the second quarter, the board says in a statement, noting that a reading of more than 50 points reflects more positive than negative responses.
Lynn Franco, director of the Conference Board Consumer Research Center, said in a statement: “CEO Confidence has declined substantially in the last two quarters and is now at its lowest level in over two years. Clearly, this prolonged period of slow growth is taking a toll on confidence, and expectations are that these lackluster conditions will persist through early 2012.”
The board did not state how many CEOs were surveyed, and it did not return calls for comment.
Mort Zuckerman, chairman and editor-in-chief of U.S. News & World Report and the publisher of the New York Daily News, said in a recent editorial for the Financial Times that there has been not just a collapse in the real estate market, or stock market, but also a collapse in confidence. Animal spirits are on the wane due to fears about Europe and Washington policies.
And it’s confidence that is necessary to turn the economy around.
In the Conference Board’s survey, conducted between August and September, CEOs indicated their appraisal of economic conditions has grown “even more pessimistic." Just 11% said conditions are better versus six months ago. The Conference Board says that is down from 33% in the second quarter. The Conference Board adds that 19% say conditions have improved, versus 40% in the second quarter of 2011.
And CEOs’ short-term outlook also deteriorated sharply. Currently, nearly one out of five, or about 19%, of the executives surveyed told the Conference Board they anticipate the economy will improve over the next six months, down from 43% in the second quarter. And expectations for their own industries are also quite negative, with approximately 22% of CEOs expecting conditions to improve in the months ahead, down from 44% last quarter,” the Board said.
That is one the reasons why executives are scaling back capital expenditures, the Board said. About 23% of business executives said they had been paring capital spending plans since January, versus 22% who said they had increased spending.
Last year, “30% of respondents had increased their capital spending plans and 20% had made cuts,” the Conference Board said. Another big reason given for slicing capital investment plans: lack of sales volume.
“A decline in sales volume was also the most common reason for decreasing spending plans,” the Conference Board said.