CEO Confidence Falls to Five-Year Low.

Vistage Survey Shows Accelerating Economic Uncertainty

SAN DIEGO -- Concerns about a worsening economy pushed the Vistage CEO Confidence Index to a five-year low of 76.0 in the fourth quarter 2007 survey. That marks a five-point drop from Q3, and a 17-point drop from one year ago. Yet, as chief executives of small- and mid-sized businesses expect the overall economy to weaken, they anticipate much smaller declines in their own firms' revenues, profits, and employment in the coming year.

A quarterly measure of economic, market, and industry trends, the national index indicates a slowdown in economic growth, but it does not foretell an economic downturn. Most firms expect to weather the financial strain caused by the credit/housing crisis and increases in energy costs, even though these risks remain a cause for concern. While the level of confidence in their own businesses remains strong, it's at the lowest level since the survey began in 2003.

"While the majority of business leaders participating think the economy will continue to post losses in the year ahead, they remain relatively confident about their own prospects," says Richard Curtin, Ph.D., a consultant for the Vistage CEO Confidence Index and director of consumer surveys at the University of Michigan at Ann Arbor. "They remain dedicated to finding and retaining good employees, with fixed investments bearing the brunt of the slowdown."

More than half of all business leaders think the economy will worsen, yet they have no plans to scale back recruitment. While staffing remains their most significant issue, economic uncertainty ranked a close second. In regard to income, two-thirds of the companies expect strong growth in their revenues, even as they are raising prices in response to the increased costs of production.

"Chief executives are tackling the issues of a tight credit market head on," says Rafael Pastor, Vistage chairman of the board and CEO. "Investments in human capital will continue as companies plan to grow in an increasingly competitive marketplace, while capital investments will decline in a slowing economy."

Stable Revenues and Profits

Chief executives' outlook on revenues remains positive, with 66 percent of all firms anticipating an increase in revenues in the coming year, compared to 68 percent in the prior quarter. Eleven percent of all firms expect their revenues to decline, just ahead of the 10 percent in Q3. Business owners are less optimistic about profit increases in the next 12 months, with 54 percent projecting higher profits compared to 75 percent at the beginning of the year. Nonetheless, nearly half of all firms anticipate increasing prices, primarily reflecting the higher costs of production and services, rather than increased profits.

Investment Plans Wither as Credit Tightens

Thirty-six percent of all firms expect the credit crisis to have a severe or moderate effect on their investment plans in the coming year, and 20 percent of all firms reduced their planned investments in Q4, the highest level ever recorded. Thirty-eight percent of all firms say they plan to increase investments in plant and equipment in 2008, just below the 40 percent recorded in the Q3 and the 45 percent recorded a year ago.

Firms Resist Staff Reductions

Despite the widespread concern about the health of the economy, just 11 percent of firms intend to reduce their level of staffing. This reflects the fact that reduced investments are much easier and less costly to reverse than reduced payrolls. Among all companies, 51 percent are increasing their payrolls, just below the 53 percent last quarter. Finding, training, and retaining employees is one issue that has remained on the top of their agendas to position their firms for future growth.

about the Vistage Confidence Index

U.S. small and mid-sized businesses represent the most vital component of the nation's economy. This sector creates 75 percent of all new jobs and generates 50 percent of all national revenue. The opinions of these business leaders provide a clear snapshot of current economic, market and industry trends and demonstrate their plans for growth over the next 12 months. These insights provide a leading indicator for employment, capital expenditure, sales, and revenue trends.

The Q4 2007 Vistage CEO Confidence Index is a compilation of responses from 2,233 CEOs of small- to mid-sized companies, surveyed Nov. 13 - 26, 2007, with a margin of error of 1.7 percentage points. The Vistage CEO Confidence Index is the only comprehensive report of chief executive opinions and projections.

about Vistage International

Vistage International (www.vistage.com) is the world's leading chief executive organization; with its affiliates, it has 14,000 members in 16 countries. Vistage members generate more than $300 billion in annual revenue and have nearly two million employees around the world. Vistage is dedicated to increasing the effectiveness and enhancing the lives of chief executives. Member companies are better run and grow their revenues, on average, at twice the percentage growth rate after joining Vistage.

Vistage International includes operations in the United States, the United Kingdom, Ireland, China, Mexico, Argentina, South Africa, Chile and the Netherlands. Vistage affiliates include TEC, The Executive Committee and The Executive Connection in the following areas: Florida, Michigan, Wisconsin, Australia, Brazil, Canada, Germany, Malaysia, New Zealand and Singapore.