A key indicator that measures chief executives’ confidence in the economy fell to a seven-year low in the fourth quarter of 2007, as fewer business leaders see improvement in the months ahead, The Conference Board reported today.
The Conference Board Measure of CEO Confidence, which had declined to 44 in the third quarter of 2007, fell to 39 in the final quarter of 2007, according to a survey of nearly 100 business leaders in a wide range of industries. A reading of more than 50 points reflects more positive than negative responses. The last time the measure fell below 40 was in the final quarter of 2000 when it sank to 31.
“CEOs’ confidence in the state of the U.S. economy continues to wither and is now at a seven-year low,” said Lynn Franco, director of The Conference Board Consumer Research Center, in a statement. “Given continued trouble in the housing and credit markets, persistent volatility in financial markets and increases in energy prices, it’s not surprising that confidence has eroded. Looking ahead, the majority of business leaders expect these lackluster economic conditions to prevail throughout the first half of 2008.”
CEOs’ assessment of current economic conditions was considerably less positive, with just 7 percent of CEOs — down from 14 percent last quarter — stating economic conditions had improved. In assessing their own industries, business leaders were also less optimistic. Approximately 15 percent claim conditions are better, down from approximately 17 percent in the third quarter.
Looking ahead six months, the outlook has turned more negative. Currently, 16 percent of business leaders expect economic conditions to improve in the next six months, down from 20 percent last quarter. Expectations for their own industries are also less upbeat, with only 17 percent anticipating an improvement, down from 27 percent last quarter.
As for the inflation outlook, the majority of chief executives expect changes in their firms’ selling prices in 2008, with just 9 percent anticipating price increases in excess of 10 percent. On average, firms plan to hike prices by 3.2 percent, slightly lower than last year’s expectation of 3.3 percent. Some 13 percent plan decreases and 4 percent foresee no change.
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