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CEOs lose faith in economy

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Those in the top jobs in Australia’s biggest companies aren’t feeling too chipper about the state of the economy, according to a new survey from The CEO Institute which shows a huge drop in positive sentiment.

According to The CEO Institute Business Confidence Index, CEO confidence in the economy has dropped from 53 points six months ago to -39 points today. This 92-point fall demonstrates a huge drop in how confident Australia’s CEOs are in the strength of the economy. However, confidence in the strength of their own businesses barely moved.

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

The index, says Davies, shows most CEOs are adopting a ‘wait and see’ attitude to investment and employment, due in part to volatility in the international economy and a lack of consumer confidence.

“This cautious attitude may feed into lack of demand in the economy – it could be a vicious cycle,” he says. “The results of the Index indicate that margin squeeze continues, with a nine-point spread between CEO expectations of sales growth versus profit growth.”

One response from the survey said, “Continued economy uncertainty is having a profound effect on consumer confidence and increased utility charges are reducing consumer spending.” Another: “Consumers are shell-shocked and not buying at the rate they used to.”

CEOs indicated the factors which would have the biggest impact on their business over the next three months were factors specific to their business (14 per cent), consumer spending (13 per cent), and government decisions (11 per cent).

Published on: Wednesday, August 31, 2011

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