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August 9, 2021

Wow, that was quick. After a surge in optimism in July, CEOs’ outlook about the direction of the economy retreated to pre-vaccine levels in August due to a growing array of concerns, including the recent Covid spike, continuing supply chain disruptions, the potential for tax increases, inflation, rising government spending and tight labor markets.

Chief Executive’s latest poll of 316 U.S. CEOs, fielded from August 3-5, found assessments of future business conditions falling to 6.8/10 from 7.3/10 last month. That’s the lowest the index has been since November 2020, and the decline was the sharpest one-month drop since the runup to last year’s chaotic election. But, in looking deeper at the numbers, there are still some reasons for optimism (though you may need to squint to see them):

  • CEOs are now equally divided in their forecast for the future, with the same proportion (34 percent) saying conditions will worsen versus those who think it will improve and those who think it will remain about the same.

  • Fewer CEOs polled are forecasting increases in profits and revenues over the next 12 months, down 6 and 2 percent respectively, to 75 and 83 percent since July.

  • But still, those numbers are higher than where they were when we started the year—up 4 and 12 percent respectively—and well above where they were at this time last year: +65 and +92 percent.

  • Similarly, only 55 percent are currently projecting to increase capex in the year ahead—down 9 percent from the previous month’s record jump.

  • But that is a 15 percent increase since January and 68 percent higher than August 2020.

  • The same trend is observed with respect to hiring. 63 percent of CEOs plan to increase their hiring over the coming year, down 6 percent since last month but up 148 percent since July 2020.

“I believe that the fundamentals of the economy are strong, but continued virus spread is holding us back,” says Marc S. Rowland, president of Tennessee-based architectural firm TMPartners, adding that he is “hopeful that we will reach heard immunity within the next six months, and the virus will start to wane.” Can’t happen soon enough. Read the full report >

—    Melanie Nolen, research director, Chief Executive Group. Research@ChiefExecutive.net
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  ON YOUR RADAR: OTHER HEADLINES WORTH NOTING

  • A hybrid mandate strategy. Uber CEO Dara Khosrowshahi explains why he’s requiring office workers to be vaccinated but not drivers. (CNBC)

  • Targeting the tariffs. Nearly three dozen business groups, including retailers, chip makers, farmers and others, called on the Biden administration to restart negotiations with China and cut tariffs on imports. (WSJ)

  • Delta disruption. The spike in Covid infections has forced companies to put plans on hold. Here are six principles CEOs can apply in their reopening decision-making and communications. (HBR)
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