Approximately 44 percent of CEOs claim current economic conditions have improved, down from nearly 59 percent last quarter

Chief executives across the United States are less confident about the state of the economy now than they were in the first quarter of this year, The Conference Board reports today in its latest survey of CEOs.

The CEO Confidence Measure fell to 55 in the second quarter, after registering 62 in the first quarter of this year. A reading of more than 50 points reflects more positive than negative responses. The survey includes about 100 business leaders in a wide range of industries.

“While overall confidence remains relatively positive, the latest reading reflects growing concerns that U.S. economic growth may be slowing down,” says Lynn Franco, Director of The Conference Board’s Consumer Research Center. “And, while the outlook for corporate profits remains optimistic, rising interest rates and oil prices may curb business leaders’ projections.”

CEOs’ assessment of current conditions deteriorated over the last quarter. Approximately 44 percent of CEOs claim current economic conditions have improved, down from nearly 59 percent last quarter. In assessing their own industries, close to 38 percent say conditions are better, down from approximately 57 percent last quarter.

CEOs’ short-term outlook has also deteriorated. Thirty-seven percent of business leaders expect economic conditions to improve in the coming months, down from 43 percent last quarter. Expectations for their own industries were also somewhat more subdued with 35 percent anticipating an improvement, down from 47 percent last quarter.

Profit Expectations Upbeat
On the issue of profit expectations over the next 12 months, 68 percent of chief executives anticipate increases. However, there are some marginal differences by category of business. Those engaged in the non-durable goods industry are the most optimistic, with 75 percent expecting profits to increase. Executives in the durable goods industry are somewhat less optimistic, with 71 percent anticipating a rise in profits. Only 61 percent of CEOs in the service industry expect profits to increase.

Among chief executive officers who expect profits to increase, 51 percent cite an increase in market/demand growth as the main source of improvement, 30 percent cite cost reductions, 16 percent cite price increases and the remaining 4 percent believe technology will drive profits up.

Source: CEO Confidence Survey, 2nd Quarter 2005.