U.S. CEOs' Confidence Falls To Lowest Level Since 2001

Recent economic slowdown and lackluster future growth shakes CEO confidence.

The Conference Board, a business research group, said its chief executives' confidence index had fallen to 44 in the third quarter compared with 50 in the second quarter of the year. "This is the first time the measure has dipped below 50 in nearly five years, when it was at 40 in the final quarter of 2001," according to The Conference Board survey.

A survey reading of over 50 points reflects more upbeat than negative responses, so the decline in the measure below 50 displays a worrying change in chief executives' sentiments.

"The lack of confidence expressed by CEOs is a result of the recent slowdown in economic growth, combined with expectations that this lackluster pace of growth will carry over into the beginning months of 2007," said Lynn Franco, a Conference Board research director. Some economists expect economic growth to slow to around 2% in the third quarter from 2.6% in the second quarter, marking an abrupt slowdown from the 5.6% growth notched up in the first three months of the year.

Much of the slowdown has been attributed to a string of interest rate hikes, the downturn in the housing market and higher energy prices, although oil prices have dropped sharply in recent weeks.

The survey found that only 16% of chief executives expect economic conditions to improve in coming months, down from 21% in the second quarter. And only 16% of CEOs believe the current economic climate has improved, down notably from about 27% in the second quarter.

Copyright Agence France-Presse, 2006

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