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The Conference Board Measure of CEO Confidence, which had decreased in the third quarter of 2018, declined in the fourth quarter. The Measure now reads 42, down from 55 in the third quarter of 2018 (a reading of more than 50 points reflects more positive than negative responses). This is the lowest reading since Q3 2012 (CEO Measure: 42).
“CEO Confidence declined in the fourth quarter, with both current conditions and expectations contributing to the year-end decline,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “Looking ahead, CEOs have grown apprehensive about growth prospects for the U.S., while sentiment regarding China and Europe has grown more pessimistic. India remains a bright spot, with CEOs mildly optimistic about growth prospects in early 2019. Ongoing trade and tariff issues, volatility in the financial markets, cost of debt, and expectations of moderating global growth are heightening concerns. If these conditions persist, we are likely to see weak confidence readings in the new year.”
CEOs’ assessment of current economic conditions turned pessimistic in the fourth quarter, with only 21% saying conditions are better compared to six months ago, down from 49% last quarter. Meanwhile, about 39% say conditions are worse, up from less than 8% in the prior quarter. CEOs were also much more negative about current conditions in their own industries compared to six months ago. Now, just 21% say conditions are better, down from 31% last quarter, while those who say conditions have worsened rose to 35%, up from 25% last quarter.
Looking ahead, CEOs’ expectations regarding the economic outlook have also turned negative. Now, just 12% expect economic conditions to improve over the next six months, down from 23% in the third quarter. Meanwhile, about 54% expect economic conditions will worsen, compared to 22% last quarter. CEOs’ expectations regarding short-term prospects in their own industries over the next six months were also more pessimistic. Now, only 14% anticipate an improvement in conditions, down from 22% last quarter, while 44% expect conditions to worsen, up from 19% in the third quarter.
Global Outlook Turns Negative
CEOs’ assessment of current global conditions continues to grow more pessimistic. Sentiment declined sharply for the US, although it remains in slightly positive territory. On the other hand, sentiment regarding China and Europe has declined significantly over the past two quarters. The declines in Japan and Brazil have been more moderate, but both markets are still viewed negatively by CEOs. CEOs’ assessment of current business conditions in India declined marginally but overall remains slightly positive.
Looking ahead, CEOs are moderately optimistic about short-term prospects for India, while expectations for all other markets have turned negative. Short-term prospects for the United States declined considerably, while growth expectations for China and Europe have shifted further into negative territory. Expectations for growth prospects in Japan and Brazil remain slightly negative, though the latter did see a modest improvement.
Price Increases Projected to Rise in 2019, but at a More Muted Pace
The majority of chief executives expect changes in their firms’ selling prices in 2019, with about 60% of CEOs anticipating price increases of less than 4%, and about 17% expecting increases in excess of 4%. On average, firms plan to hike prices by 1.6%, down from 2.1% from last year, based on a supplementary question asked annually. About 20% plan decreases in selling prices, and 3% foresee no change.
