CEO Confidence Dives In 2000's Final Quarter

Staff -- graphic arts online, 3/1/2001

In late January, the Conference Board released the results of a survey showing that U.S. chief executives' confidence in the nation's economy plummeted during the final quarter of 2000. The Board's "Measure of Business Confidence" (MBC) declined by 16 points between the third and fourth quarters of last year, to a reading of 31. In this net-concept diffusion index, where a reading of more than 50 reflects more positive responses than negative responses, the MBC has now been "bearish" for three consecutive quarters.

In assessing current economic conditions, 85% of the executives surveyed said that they felt conditions were worse today than six months ago. This contrasts sharply with sentiment during last year's third quarter, when a relatively small percentage (29%) of this group saw conditions as having deteriorated over the previous two quarters.

Perhaps more significantly, the executives gave a pessimistic assessment of the short-term outlook for the economy. A solid majority of 65% of these business leaders said that they expected economic conditions to worsen in the coming months, while only 8% expected improved conditions.

Thus, the latest MBC report provides further evidence that a slower pace of economic growth will prevail at least through the first half of 2001. But in the judgment of Conference Board analysts who follow trends in the MBC very closely, there is still little evidence from this business confidence survey that we're on the verge of a recession. There's little question, however, that the U.S. began this year in a much more vulnerable position than at any time in the past decade, particularly given the dangerous self-fulfilling prophecy dynamic of low consumer and business confidence.