Investment decisions are based on expectations. So we continue to pay attention to how business leaders and consumers perceive the economy.
So three recent surveys send up warning flags. Uncertainty up; confidence declining.
The Conference Board Measure of CEO Confidence shows corporate leaders continue to be reserved in their expectations.
The Conference Board Measure of CEO Confidence™, which had increased marginally in the first quarter of 2019, was unchanged at 43 in the second quarter of 2019 (a reading of more than 50 points reflects more positive than negative responses).
“CEO Confidence was unchanged in Q2, and remains at a moderately pessimistic level,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “CEOs’ expectations for growth prospects in mature and emerging economies remain subdued, with no pickup anticipated in the short-term. CEOs’ profit expectations have weakened compared to last year, with trade and tariff uncertainties and signs of a slowing global economy the likely causes of the deterioration.”
Small business leaders, who have generally been upbeat, are now also showing greater reserve. According to the NFIB,
America’s small business owners’ optimism took a modest downturn in June, according to the NFIB Small Business Optimism Index, slipping 1.7 points to 103.3. While optimism remains at historically high levels, the June figure reverses the gain posted in May, with six components falling, three improving, and one unchanged. The Uncertainty Index rose substantially, increasing seven points to the highest level since March 2017.
“Last month, small business owners curbed spending, sales expectations and profits both fell, and the outlook for expansion dampened. When you add difficulty finding qualified workers and harmful state level laws and regulations, you’re left with a volatile mix where uncertainty has increased to levels not seen in more than two years,” said NFIB President and CEO Juanita D. Duggan
The Conference Board Consumer Confidence Index® declined in June, following an increase in May. The Index now stands at 121.5 (1985=100), down from 131.3 in May. The Present Situation Index – based on consumers’ assessment of current business and labor market conditions – decreased from 170.7 to 162.6. The Expectations Index – based on consumers’ short-term outlook for income, business and labor market conditions – decreased from 105.0 last month to 94.1 this month.
“After two consecutive months of improvement, Consumer Confidence declined in June to its lowest level since September 2017 (Index, 120.6),” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “The decrease in the Present Situation Index was driven by a less favorable assessment of business and labor market conditions. Consumers’ expectations regarding the short-term outlook also retreated. The escalation in trade and tariff tensions earlier this month appears to have shaken consumers’ confidence. Although the Index remains at a high level, continued uncertainty could result in further volatility in the Index and, at some point, could even begin to diminish consumers’ confidence in the expansion.”
Reason for concern.