CEOs Worry About the World

Research called “YPO Global Pulse” is a quarterly survey of the economic sentiment of chief executives. The latest edition, based on questions put to the YPO network of 20,000 CEOs in 120 countries, covers the second quarter. It shows that:

The YPO Global Pulse Index decreased 4.1 points to 59.7 in the second quarter, on the back of declines in every region except Africa, which edged up 1.3 points to 65.6. This marks the index’s first decline since the third quarter of 2011.

That means the sentiments of these corporate leaders has caught up to nearly everyone else’s. Their opinions may be tardy compared to others, but these executives do oversee hiring and major investments made by their companies, which gives them special economic weight.

As would be expected, the poorest sentiment for YPO members is among EU leaders:

The European Union remained the least optimistic region. At 52.0,it is near the neutral mark on the scale, indicating that EU CEOs are ambiguous about future prospects.

Given the recession in many EU nations, and the financial trouble of certain sovereigns and many banks, the attitude is unusually positive. It is fair to guess that deep down, though, these CEOs will not act in parallel to their responses. The region in which they operate is just too badly damaged.

The data from Asia is more troubling, as well as a signal that the economy there may be slowing more rapidly than reported elsewhere:

Asia’s confidence edged lower to 60.1, its lowest level in the history of the YPO Global Pulse. It is roughly in line with the global reading, but well off its high of 69.9 recorded two years ago.

Confidence among those in the United States has dropped to 60, which is still relatively high, and at almost the same level as Asia.

CEOs typically are optimistic by nature. That is true as it pertains to investors, customers and employees. An outlook based on doom would hardly help CEOs maintain whatever prospects the companies they led have. So, “YPO Global Pulse” is not much of a guide to what is going on in the real world.

Douglas A. McIntyre