The confidence gap: the growing difference between current and future confidence and what it means.CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. Confidence has been growing strongly since it's it's 1. Contraction of it is. 2. Contraction of it has. See Usage Note at its. it's it is or it has it's be ~have low of 89.4 in April 2003. It now stands at 170.1, only 6.3 points off it's highest mark ever. CEOs have become increasingly optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op about hiring and with that the unemployment rate has fallen from 6.4% in June June: see month. of 2003 to 5.2% in January January: see month. of 2005. The Dow Jones Dow Jones the best known of several U.S. indexes of movements in price on Wall Street. [Am. Hist.: Payton, 202] See : Finance has seen a healthy rebound rebound (rē´bownd), n/v 1. a recovery from illness. n 2. an outbreak of fresh reflex activity after withdrawal of a stimulus rebound adjective and risen over 38% from March 2003. The CEO Index data looks strong, all indicators were up this month. Among this tide of confidence and increased productivity and efficiency, an alarming trend is developing. This month we have analyzed an·a·lyze tr.v. an·a·lyzed, an·a·lyz·ing, an·a·lyz·es 1. To examine methodically by separating into parts and studying their interrelations. 2. Chemistry To make a chemical analysis of. 3. the growing gap between Future CEO Confidence and Current CEO Confidence. Tracking it all the way back to their parity parity or space parity, in physics, quantity that refers to the relationship between an object or process and the image that it can produce in a mirror. level in October October: see month. 2002 we notice two key trends: CEOs up until December December: see month. 2003 were more confident in the future and therefore anticipated growth. Since December 2003, we have seen a dramatic increase in the divide, as CEOs have become very confident in current conditions but future confidence has lagged increasingly behind. To be fair, October 2002 probably was not a month when current confidence was equal to future confidence. For that reason, it may be true that a healthy level of difference between the two may be something greater than zero. Nevertheless, it is unlikely that the true difference spans 40 points, and if we expect that difference is reaching its maximum point, we should have a few expectations on what CEO Confidence will look like over the next few months and subsequently what we might see in the market. [GRAPHIC OMITTED] [GRAPHIC OMITTED] The first thing to realize is that CEO Confidence is reaching a high point. Because all confidence indices (Consumer Confidence and Consumer Sentiment Sentiment can refer to:
If we assume that to be true, and we expect the gap between current and future confidence to shrink shrink Vox populi noun A psychiatrist , we are faced with one of two likely scenarios: either we will see CEO Confidence fall until current confidence and future confidence are more in line with each other or we will see that CEO Confidence holds or slightly edges forward driven largely by increases in future confidence. At this juncture junc·ture n. The point, line, or surface of union of two parts. , the reader is just as qualified at prognostication, but I would venture a few thoughts that might shape our outlook. CEOs are an inherently optimistic group-they are the fuel of American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of capitalism capitalism, economic system based on private ownership of the means of production, in which personal profit can be acquired through investment of capital and employment of labor. and with that comes levels of optimism Optimism See also Hope. Bontemps, Roger personification of cheery contentment. [Fr. Lit.: “Roger Bontemps” in Walsh Modern, 66] Candide beset by inconceivable misfortunes, hero indifferently shrugs them off. [Fr. uncharacteristic un·char·ac·ter·is·tic adj. Unusual or atypical: an uncharacteristic display of anger. un of the population. For that reason, further increases in optimism should not be surprising. This will likely be driven by increases in future confidence. However, future confidence in our index is driven by future increases in the stock market, employment, or capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. . Unemployment is unlikely to change dramatically as we approach our economy's natural level of unemployment (see previous article on employment), and the market buoyed by some serious gains in the Dow (Direct OverWrite) See magneto-optic disk. is unlikely to sustain dramatic increases without analysts crying for an approaching bubble A bit in bubble memory or a symbol in a bubble chart. . That leaves capital spending, and with that we are left with the question of whether we expect that CEOs will use this time of increased labor productivity and cheap capital to make investments in technology, infrastructure, automation, and manufacturing. With the decline in the dollar we can also expect that relatively more of those capital expenditures will be domestic. The gap between current and future confidence may be widening, but that isn't is·n't Contraction of is not. isn't is not isn't be to say CEO Confidence is doomed. Strong increases in spending and a sustained but gradual The Gradual (Latin: graduale, sometimes called the Grail) is a chant in the extraordinary form of the Roman Catholic Mass, sung after the reading or singing of the Epistle and before the Alleluia, or, during penitential seasons, before the Tract. growth in the Dow Jones may be on the horizon. [GRAPHIC OMITTED]
Apr04 May04 Jun04 Jul04 Aug04
CEO Index 158.3 172.8 169.5 177.4 169.7
Chief Executive Component Indices: On October, 2002, all indices were
set at 100
Current Confidence Index 161.3 183.0 181.5 195.2 186.9
Future Confidence Index 156.2 166.0 161.3 165.4 158.0
Business Condition Index 181.2 197.0 191.1 202.1 189.7
Investment Confidence Index 140.1 149.4 141.8 145.5 143.7
Employment Confidence Index 156.1 176.1 181.1 191.2 180.8
Assessment of Current Confidence Index
Business Conditions
Good 34.5% 44.6% 45.0% 52.2% 45.3%
Normal 51.8% 47.0% 45.3% 39.2% 46.4%
Bad 13.7% 8.4% 9.7% 8.6% 8.4%
Employment Conditions
Good 14.7% 22.0% 27.0% 31.8% 31.7%
Normal 50.2% 54.2% 52.9% 50.9% 50.0%
Bad 35.1% 23.7% 20.1% 17.3% 18.3%
Investment Conditions
Good 42.0% 50.0% 42.6% 50.6% 43.5%
Normal 46.8% 41.2% 45.4% 41.5% 46.3%
Bad 11.2% 8.8% 12.0% 8.0% 10.2%
Assessment of Future Confidence Index
Employment Conditions
Increase 56.4% 65.9% 64.9% 71.8% 59.7%
Stay the same 39.1% 31.1% 31.9% 25.4% 35.2%
Decrease 4.5% 3.0% 3.2% 2.8% 5.1%
Capital Spending
Increase 46.9% 52.9% 52.6% 45.8% 51.4%
Stay the same 46.0% 41.6% 38.2% 47.0% 41.5%
Decrease 7.1% 5.5% 9.2% 7.2% 7.1%
Economic Developments
Rapid growth 3.8% 6.8% 5.4% 9.6% 3.9%
Gradual growth 78.2% 81.4% 77.1% 78.0% 76.3%
No growth or decline 15.1% 10.8% 14.6% 10.5% 16.6%
Gradual decline 2.6% 1.0% 2.6% 1.4% 2.8%
Rapid decline 0.3% 0.0% 0.3% 0.5% 0.3%
Sep04 Oct04 Nov04 Dec04 Jan05
CEO Index 159.7 159.4 162.3 171.8 169.9
Chief Executive Component Indices: On October, 2002, all indices were
set at 100
Current Confidence Index 173.5 173.2 177.3 189.6 191.5
Future Confidence Index 150.3 150.0 152.1 159.7 155.3
Business Condition Index 178.9 177.3 182.3 194.0 190.7
Investment Confidence Index 135.6 137.0 137.2 142.5 142.4
Employment Confidence Index 169.2 168.4 172.3 184.8 182.2
Assessment of Current Confidence Index
Business Conditions
Good 37.3% 38.3% 41.1% 46.4% 45.8%
Normal 52.2% 51.6% 50.3% 46.6% 47.5%
Bad 10.5% 10.1% 8.6% 7.1% 6.7%
Employment Conditions
Good 24.7% 24.2% 27.9% 34.3% 29.8%
Normal 55.6% 54.1% 54.0% 51.8% 57.8%
Bad 19.8% 21.7% 18.1% 13.9% 12.4%
Investment Conditions
Good 39.2% 37.3% 37.5% 42.6% 45.2%
Normal 46.0% 50.4% 46.7% 44.4% 46.2%
Bad 14.8% 12.3% 15.8% 13.0% 8.6%
Assessment of Future Confidence Index
Employment Conditions
Increase 52.8% 54.6% 54.3% 59.7% 59.7%
Stay the same 40.4% 38.0% 37.1% 34.3% 33.4%
Decrease 6.8% 7.4% 8.6% 6.0% 6.9%
Capital Spending
Increase 47.2% 47.4% 51.0% 53.0% 46.8%
Stay the same 43.2% 44.9% 41.2% 39.7% 44.9%
Decrease 9.6% 7.7% 7.7% 7.3% 8.2%
Economic Developments
Rapid growth 2.2% 1.4% 2.4% 1.3% 1.5%
Gradual growth 72.2% 70.8% 72.8% 84.1% 80.4%
No growth or decline 22.2% 23.2% 20.7% 13.5% 15.2%
Gradual decline 3.1% 4.4% 3.6% 1.1% 2.9%
Rapid decline 0.3% 0.3% 0.6% 0.0% 0.0%
Feb04 Mar04
CEO Index 163.5 170.1
Chief Executive Component Indices: On October, 2002, all indices were
set at 100
Current Confidence Index 182.3 193.6
Future Confidence Index 150.8 154.2
Business Condition Index 184.5 192.9
Investment Confidence Index 138.0 144.3
Employment Confidence Index 172.9 178.1
Assessment of Current Confidence Index
Business Conditions
Good 41.5% 50.2%
Normal 51.2% 42.3%
Bad 7.3% 7.6%
Employment Conditions
Good 29.7% 33.9%
Normal 52.3% 51.5%
Bad 18.0% 14.6%
Investment Conditions
Good 39.4% 44.6%
Normal 49.6% 46.3%
Bad 11.0% 9.1%
Assessment of Future Confidence Index
Employment Conditions
Increase 52.4% 52.5%
Stay the same 39.8% 39.7%
Decrease 7.8% 7.7%
Capital Spending
Increase 47.0% 51.6%
Stay the same 44.3% 40.0%
Decrease 8.7% 8.4%
Economic Developments
Rapid growth 1.0% 1.9%
Gradual growth 76.4% 79.6%
No growth or decline 19.1% 15.7%
Gradual decline 3.5% 2.9%
Rapid decline 0.0% 0.0%
A monthly report from Chief Executive Magazine. [c] Copyright, 2005. All rights reserved. For more information go to www.chiefexecutive.net. Chief Executive Magazine, 110 Summit Avenue, Montvale Montvale may mean:
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