CEOs Remain Cautious About Economy in Latest YPO Global Pulse Survey

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The YPO Global Pulse Confidence Index for the United States was virtually unchanged compared with the previous quarterly survey, falling less than 1 point to 59.1 in the latest poll of U.S. CEOs. This follows a much steeper 5.1-point decline in the second quarter. At the current level, the index remains in optimistic territory (above 50) and is in line with the global sample.

The YPO Global Pulse Confidence Index for the United States was virtually unchanged compared with the previous quarterly survey, falling less than 1 point to 59.1 in the latest poll of U.S. CEOs. This follows a much steeper 5.1-point decline in the second quarter. At the current level, the index remains in optimistic territory (above 50) and is in line with the global sample.

The October survey results were announced today by YPO (Young Presidents’ Organization), a not-for-profit global network of 20,000 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 1,700 CEOs representing companies of all sizes around the world, including more than 800 in the United States.

Key Findings
Views on the economy vary by industry.-- When asked to evaluate economic conditions today compared with six months earlier, CEOs collectively reported that conditions had deteriorated slightly, but there were important differences with respect to the type of company. Just one manufacturing CEO in five, or 21%, said that business and economic conditions had improved over the last six months. By comparison, in the prior-quarter survey, nearly double that amount, or 38%, said they had seen a pickup. Construction firms had the opposite experience. In the latest survey, 44% said that economic conditions had improved versus 27% who said so in the previous quarter. Service-oriented businesses did not see conditions change much between the second and third quarters.

Manufacturers turn gloomier while construction brightens. -- The pattern noted above held true when respondents considered their six-month outlook. Taken as whole, views turned slightly less optimistic compared with the second quarter. But manufacturing companies became decidedly more negative at the same time construction firms grew more positive. The percentage of manufacturing companies that expected conditions to worsen increased by 10 percentage points, to 27% from 17%, while the percentage of construction companies expecting worse conditions actually declined, to 23% from 29%. Like manufacturing companies, the outlook from the service sector deteriorated in the third quarter, but only slightly. Looking at the responses by company size, sentiment shifted more sharply among medium-sized firms (100-500 employees), where just 35% thought that economic conditions would improve over the next six months, down from 43% who held that belief one quarter ago.

Sales outlook barely budges. -- When asked to forecast sales looking 12 months into the future, the CEOs responding in the latest survey were just slightly less enthusiastic than the respondents in the July survey. The YPO Sales Confidence Index for the United States slipped 0.4 point to 66.3. While the level is lower than it was in the first half of the year, at 66.3 it would appear that firms overall generally expect their customers to be spending at a higher level a year from now.

Hiring outlook stays on two-year trend line. -- The YPO Employment Confidence Index for the United States also declined slightly, dipping 0.5 point to 58.6, a level it has hovered around for the past two years.

Investment outlook virtually unchanged. -- The YPO Fixed Investment Confidence Index edged lower in the second quarter to 58.7 from 59.0, still within the narrow range the index has been in over the last two years. It indicates that YPO executives overall believe that the United States will remain a fairly attractive place to invest looking ahead 12 months.

“The sharp drop in confidence we saw in the July survey leveled off in October, indicating that American CEOs are neither getting more optimistic nor becoming more concerned about the economy compared with how they felt in July,” said Alan Zafran, partner of California-based investment adviser Luminous Capital and a member of YPO’s Global One Chapter. “Looking out 12 months, the survey continues to point to a moderate pace of expansion in 2013.”

Stephen Slifer, YPO Global Pulse economic adviser and chief economist at NumberNomics, said, “No doubt, uncertainty caused by the upcoming presidential election and the so-called ‘fiscal cliff’ are weighing on CEO confidence right now. They also see the European Union in a mild recession and are casting a wary eye on China. Against this background, firms are postponing important hiring and investment decisions until the outcomes of these events are more clearly defined.”

Global Results
The YPO Global Pulse Confidence Index declined 0.7 point to 59.0 in the October 2012 survey from 59.7 in the July survey. This follows a decline of more than 4 points in the second quarter. Among the nine regions of the world, Latin America recorded the highest confidence level in the latest survey, rising 1.3 points to 63.8. Confidence remained lowest in the European Union, declining marginally to 51.4 from 52.0 three months ago. Non-EU Europe showed a sharp drop in the latest survey, falling 3.8 points to its all-time low of 55.6. Asia also hit its all-time low, dropping 0.1 point to 60.0. The United States reading was virtually unchanged, declining 0.9 point to 59.1.

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.

Survey Methodology
The quarterly electronic survey, conducted during the first two weeks of October 2012, gathered answers from 1,743 chief executive officers across the globe, including 811 in the United States. Globally, 26% of participants were from large companies (more than 500 employees), 39% from medium-sized companies (100-500 employees), and 35% from small companies (less than 100 employees). By business sector, 25% of participants were from the production sector, 9% from construction, and 66% from the services sector. For more information, go to

About YPO
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 20,000 peers and their families in more than 120 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. Altogether, YPO member-run companies employ more than 15 million people around the world and generate US$6 trillion in annual revenues. For more information, visit Also see us on Facebook and follow us on Twitter.

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Michèle Foster
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