The survey results tell you that most CEOs are confident in the strength of their own organizations but are deeply concerned that other factors out of their control may hamper their companies' performance.
Dallas, TX (PRWEB) November 02, 2011
The YPO Global Pulse Index for the United States fell 3.4 points in the third quarter of 2011 to 57.7 as confidence weakened among the more than 1,000 U.S. CEOs responding to the survey. The quarterly electronic survey was conducted during the first two weeks of October.
This is the second consecutive decline and the first time the U.S. index has fallen in succeeding quarters since the Global Pulse index began in July 2009. The YPO Confidence Index is centered on 50, so a reading of 57.7 indicates that CEOs are moderately confident that the economy will expand over the next 12 months but less confident than they have been since July 2010.
The survey results were announced today by YPO (Young Presidents’ Organization), a not-for-profit global network of 19,000 chief executive officers. The YPO Global Pulse is the only CEO economic sentiment survey to span the globe on a quarterly basis, capturing answers from more than 2,000 CEOs representing companies of all sizes around the world.
- Business conditions have deteriorated. When asked about their assessment of the economy today versus six months ago, CEOs clearly believe that business conditions have worsened. Only 27% of respondents thought the economy had improved, compared with 46% who felt it had improved in the July survey. Similarly, 36% believed that conditions had worsened, versus 17% who felt that way three months earlier. The assessment was uniform across companies of all sizes in all sectors (production, construction and services).
- Economy expected to struggle over next six months. When asked about their assessment of economic conditions six months from now compared with today, survey respondents were gloomy. Less than a third (30%) expected the economy to improve during the next six months compared with 45% who said so three months ago. Meanwhile, 25% expected things to get worse during the next six months compared with just 12% who held that view last quarter.
- CEOs are still optimistic about sales. When asked to look ahead 12 months, YPO CEOs were not nearly as pessimistic. For example, the YPO Sales Confidence Index for the United States slipped 2.6 points to 64.8, which is still a robust level. The highest level for this index was 68.9 in the first quarter of this year. This modest downgrade in the assessment for sales was broadly based across firms in all sectors and sizes. At its current level, the index would suggest that CEOs are fairly confident about sales growth over the next 12 months, despite their more subdued outlook for the nearer term.
- Employment outlook unchanged. The YPO Employment Confidence Index for the United States was largely unchanged in the third quarter. The index declined less than half a point to 58.3. The reading suggests that CEOs are likely to keep hiring workers at a modest pace for the foreseeable future. Firms in all sectors and of all sizes reported only small changes in their 12-month outlook for employment.
- Investment outlook slips slightly. The YPO Fixed Investment Confidence Index for the United States dropped 1 point to 58.2. This followed a similar modest decline in the second quarter after the index reached a peak of 61.3 in January of 2011. At 58.2, the index suggests that investment should continue to expand over the coming year. This marginal decline in investment confidence was concentrated largely at manufacturing firms, where just 32% of survey respondents expected to boost capital spending over the next 12 months, down from 46% in July. Companies in the construction and services industries reported only minor changes. Firms of all sizes trimmed their investment expectations.
“The survey results tell you that most CEOs are confident in the strength of their own organizations but are deeply concerned that other factors out of their control may hamper their companies' performance,” said Alan Zafran, managing partner of California-based investment adviser Luminous Capital and a member of the Global One Chapter of YPO.
Stephen Slifer, YPO Global Pulse economic adviser and chief economist at NumberNomics, said, “The moderate decline in the YPO Global Pulse Index of U.S. CEO confidence stands in sharp contrast to most consumer confidence measures, which have plunged to levels last seen during the 2008-2009 recession. This probably reflects the fact that corporate profits and liquidity are at record high levels and companies have been very cautious about building inventory and hiring additional workers. As a result, firms are in good shape to withstand a modest slowing in the pace of economic activity.”
The YPO Global Confidence Index fell 3.3 points to 58.0 in the third quarter of 2011. At 58.0, the index is at a level not seen since the fourth quarter of 2009. Confidence was down in every region except for non-EU Europe, which was roughly unchanged after falling sharply in the previous quarter. Asia is still the world’s most optimistic region, but its lead has been narrowing steadily: Asia’s confidence level of 60.9 is just 2.9 points higher than the global reading, down from a gap of 10.1 points in July 2010. The European Union remains the least confident region in the world, falling 5.6 points to 51.8. Confidence levels across all regions are converging. The standard deviation of regional confidence is now 2.6, down from 4.3 in January 2010. Notably, the divergence between the emerging markets and the developed world is narrower than average over the 10-quarter Global Pulse series.
YPO Global Pulse Confidence Index
The YPO Global Pulse Confidence Index combines CEO answers about expected and most-recent-quarter sales, employee numbers, fixed investment and business conditions. The index is centered on 50. An index reading below 50 indicates a negative outlook – the lower the number, the more negative the outlook. A reading above 50 indicates a positive outlook – the higher the number, the more positive the outlook.
The quarterly electronic survey, conducted in the first two weeks of October 2011, gathered answers from 2,284 chief executive officers across the globe, including 1,239 from the United States. Globally, 26% of participants are from large companies (more than 500 employees), 37% from medium-sized companies (100-500 employees), and 37% from small companies (less than 100 employees). By business sector, 24% of participants are from the production sector, 9% from construction and 67% from the services sector. For more information, go to http://www.ypo.org/globalpulse.
YPO (Young Presidents’ Organization) is a not-for-profit, global network of young chief executives connected around the shared mission of becoming Better Leaders Through Education and Idea ExchangeTM. Founded in 1950, YPO today provides 19,000 peers and their families in more than 100 countries with access to unique experiences, world-class resources, alliances with top learning institutions, and specialized Networks that help them enhance their business, community and personal leadership. For more information, visit http://www.ypo.org. See us also on Facebook and follow us on Twitter.
YPO (Young Presidents’ Organization)
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