06/08/2020

CEO Confidence Rising In June

Some unique insights from Chief Executive magazine

Friday’s surprising job numbers, which showed an unexpected dip in the unemployment rate and the addition of some 2.5 million jobs in May, were a clear sign that—knock wood—the worst may be behind us when it comes to the economic fallout from COVID-19.

Chief Executive can add a few more data points to the positive outlook this morning. Our monthly CEO Confidence survey, fielded June 2-3, finds confidence in current business conditions among chief executives up 14 percent versus May, and CEO confidence in business conditions a year from now up 2 percent over the prior month. As Melanie Nolen, our research editor, reports, CEOs attribute the growing optimism to the reopening of the economy, low interest rates, order backlogs and revitalized consumer demand across many sectors. Some additional highlights: 

• While our reading of current business conditions remains in “weak” territory, at 4.6 out of 10—down 34 percent from where it began the year—CEO expectations of business conditions a year from now are back where they were at this time last year, at 6.5 out of 10 on our 1-10 scale.

• Three-quarters of polled CEOs say their business is now fully operational, 31 percent of which are back on site and no longer working remotely. Only 13 percent say they are still operating at less than 50 percent capacity.

• A growing number of CEOs are forecasting increases in profits and revenues for the year ahead: 37 and 40 percent, respectively, compared to 32 percent for both last month.

• We see a similar trend when looking at the proportion of CEOs who anticipate increases in hiring and capital expenditures over the next 12 months. Overall, in June, 26 percent of polled CEOs are anticipating adding to both their workforce and capex. That reflects an increase of 26 and 16 percent, respectively, from the month prior.

It’s not all rosy, of course. Many CEOs we polled expressed concern about a resurgence of the virus prompting a renewed economic shutdown and the still-historically-high unemployment rate; civil unrest and the presidential election also remain areas of concern, and for good reason. And anyone expecting that the nascent re-openings in all 50 states will restore the robust economy we saw before the pandemic should read this smart piece on Chief Executive from members of the Conference Board’s task force on COVID, who say that’s unlikely to happen, thanks to an endless string of potential Catch-22s.

Still, there is more reason for optimism than we’ve had in a while. Sentiment among CEOs in the majority of business sectors is either flat or turning positive, according to our survey, with future confidence among transportation CEOs—a solid leading indicator for the rest of the economy—up 21 percent month over month. 

“I believe as the economy reopens and, hopefully, millions get back to work, our business will do better,” says Richard E. Durst, president and CEO of Arctic Express, an Ohio-based refrigerated trucking company. “We haul refrigerated and frozen foods from manufacturers to grocery DC's, and folks have to eat, so we should benefit.” He rates his outlook for the next 12 months a 7 out of 10. Not incredible, but heck—we’ll take it. — Dan Bigman, Editor, Chief Executive dbigman@ChiefExecutiveGroup.com