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CEO economic confidence plummets

Local CEOs are rapidly losing confidence in the economy; with the latest figures from the CEO Institute Business Confidence Index demonstrating a huge drop in positive sentiment.

Six months ago CEO confidence in the economy was at +53, but it is now at -39, a fall of 92 points.

The latest index, the third in 2011, drew responses from 299 CEO’s around the nation and saw an overall drop from 30+ in the previous quarter to +3 this quarter.

The CEO’s National Spokesperson Evan Davies said the results show that business is finely poised between optimism and pessimism.

“The only bright spot is CEO’s confidence that they can still run their own business profitably. This holds more weight for their own businesses than the economy, but their view of the economy will affect how they run their businesses.”

Davies believes that the index shows that CEOs are relatively confident about continuing to invest and employ, but an increasing number are taking a “wait and see” attitude, driven mainly by the rapid deterioration in the international environment and lack of consumer confidence.

Davis questions whether the cautious attitude may feed into the lack of demand in the economy, and could be a vicious cycle.

Larger companies are the least confident about the economy, profit and sales – however they do not expect margin squeeze to be less than smaller companies. This may suggest smaller businesses are left to carry the economy which they will do by being much more likely to hire than average.

Results of the Business confidence by State shows the most dramatic fall in optimism was in Western Australia and confidence in NSW and Victoria were close to zero.

When asked to comment on results of the latest quarterly CEO participants suggest the lack of business confidence stems from the carbon tax, lack of confidence in the government, debtors taking longer to pay and difficulty in securing finance for SMEs from the banks.

One respondent believes that “having the right people in the right jobs all pulling together in the right direction” is exactly what the economy needs now.