CEO Confidence Declines Slightly

The Conference Board Measure of CEO Confidence, which had increased in the second quarter of 2016, retreated slightly in the third quarter. The Measure now reads 50, down from 52 in the previous quarter (a reading of more than 50 points reflects more positive than negative responses).

“Confidence among CEOs decreased in the third quarter this year, but CEOs’ short-term outlook for the U.S. remains positive,” said Lynn Franco, Director of Economic Indicators. “Sentiment regarding Europe’s outlook declined, most likely due to the expected negative fallout from Brexit. CEOs’ outlook for Brazil improved considerably from last quarter, but on whole remains negative, while expectations for growth in China have gone from negative to neutral. Regarding spending plans, the results were mixed. About a quarter of chief executives report increasing their companies’ capital spending plans since January, while the same proportion say they have scaled back spending.”

CEOs’ appraisal of current economic conditions was less optimistic, with 17 percent saying conditions are better compared to six months ago, down from 21 percent last quarter. Business leaders’ assessment of current conditions in their own industries also moderated, with 21 percent stating conditions in their own industries have improved versus 30 percent in the second quarter.

CEOs’ short-term outlook for the U.S. economy held steady, with 25 percent expecting better economic conditions over the next six months, about the same as last quarter. The outlook for their own industries, however, was less favorable, with about 23 percent of CEOs anticipating an improvement over the next six months, down from almost 33 percent in the second quarter.

Global Outlook

CEOs’ assessment of current conditions in the United States, Europe and China declined slightly, with chief executives now slightly negative. CEOs’ assessment of Japan, Brazil and India improved. However, chief executives still remain moderately pessimistic about Japan. Despite a significant improvement from last quarter, CEOs’ appraisal of Brazil also remains negative.

CEOs are positive about short-term expectations for business conditions in India, the U.S. and China. The outlook for Japan and Brazil remains moderately pessimistic, while prospects for conditions in Europe declined into negative territory.

Capital Spending Plans Mixed

About 23 percent of chief executives report increasing their companies’ capital spending plans since January of this year, while about the same proportion claimed to have scaled back spending, based on a supplementary question. Last year, 26 percent of respondents had increased their capital spending plans and 20 percent had made cuts. An increase in expected return was the most common reason given for increasing capital investment plans, while a decline in sales volume was the most common reason for scaling back spending plans.

Accounting