Promise of rate cut drives CEO confidence [Q3 Vistage CEO Index]

The latest Vistage CEO Confidence Index shows a slight improvement in CEO sentiment compared to last quarter, rising by 1.8 points to 85.1. But there is a light at the end of the tunnel: interest rate cuts. Indeed, the survey, which involved 1,626 CEOs, was conducted before the Federal Reserve announced its rate cut of 50 basis points.

With additional cuts expected, more CEOs are becoming optimistic about the future. Forward-looking economic sentiment rose to 32%, the highest point since the pandemic. However, the view of the current economy compared to last year continues to decline.

Our analysis shows that confidence remains well below the norms of a pre-pandemic marketplace as the same issues and challenges weighed on businesses in the first half of 2024 continue.

• Inflation continues to creep down; however, everything still costs more.
• While interest rates have started to fall, 60% of CEOs said the cut will not impact their businesses until at least 2025.
• Hiring has become easier and employee retention rates have stabilized as workforce velocity has slowed.

Revenue and profit expectations among CEOs both rose from last quarter. Over 6 in 10 CEOs report increased revenues due to rising demand and the ability to increase prices. Marcel Sarzen, President/CEO of ITLogica, Inc., an IT services firm in Norcross, Georgia, says his company is “successfully landing new customer projects — we are seeing increased demand and opportunity.”

Another respondent in the manufacturing industry shared that their revenue expectations are buoyed by “steady sales growth and increased prices,” while they focus on productivity by making their “organization leaner and implementing robotics.”

Meanwhile, plans for investments and hiring hovered near the 2024 average. The lower rates of investment, however, are not due to election uncertainty. Just 16% of CEOs have delayed investments due to election uncertainty, while the majority (81%) report the upcoming election has had no impact on their business decisions.

• Current Economy: 41% of CEOs think the economy is worse compared to last year — a 6-point increase from 35% last quarter.
• Future Economy: Nearly one-third (32%) of small business leaders expect the economy to improve over the next year — a 9-point increase from last quarter. The percentage that expects it to worsen fell 3 points to 23%.
• Revenue Projections: 63% of CEOs expect increased revenues over the year ahead, and just 10% expect a decline, the healthiest proportion since Q1 2022.
• Profitability Projections: 49% of CEOs expect increased profits in the next 12 months, while 15% expect profits to decline.
• Fixed Investment Plans: Over one-third of CEOs (34%) plan to increase fixed investments over the next 12 months, while 15% plan to reduce fixed investment spending.
• Workforce Expansion Plans: Half of the CEOs surveyed reported plans to expand their workforce in the next 12 months, and 9% expect it to contract.

To explore the full Vistage CEO Confidence Index survey dataset, visit our data center.

ITR Economics analysis: Now is the time to invest in your business

With the slight increase in CEO confidence despite ongoing economic challenges such as inflation and interest rates, small and midsize companies must invest in efficiency and automation to navigate the current economic landscape and prepare for the anticipated growth cycle in 2025.

Lauren Saidel-Baker from ITR Economics states that the U.S. Industrial Production Index will remain somewhat flat through the remainder of this year but rise again by 2025 and 2026. As the Vistage CEO Confidence Index is a leading indicator for the U.S. Industrial Production Index, she sees this quarter’s data “as really reflective of this environment of positive growth, but more controlled, more sustainable growth.”

For any business, Saidel-Baker reiterates that it’s important to know what indicators your business correlates with and to “know where your lead or lag time falls and use that for your appropriate planning.”

Learn more: Watch ITR Economics Analysis

Focus on Productivity

The path to increased productivity is paved with obstacles and hurdles, just as always. Reduced workforce engagement and motivation reduce output. Workforce velocity results in new, inexperienced and disconnected workers. The lack of connectedness is also one of the downsides of the work-from-home model. Learning and cultural adoption are best established when people work together, yet the hybrid model is not going away anytime soon as flexibility is in high demand among employees. With an economy poised to grow, leaders should make key investments to increase productivity, ensuring they are first out of the gate for the pending growth cycle.

Download the report to learn more about how CEOs are currently investing in productivity, and consider tactics you might deploy yourself to improve the efficiencies of your workforce in preparation for the next growth cycle.

To explore the full CEO Confidence Index dataset and track these trends over time, visit our data center.

The Vistage CEO Confidence Index was calculated from an online survey sent to 9,941 active Vistage members who are part of Chief Executive and Small Business groups in the United States. It was open between September 3 and 17, 2024. The results reflect insights from 1,626 respondents.

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