Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

CEOs Are Worried


CEOs and consumers alike have solid reasons to be worried about what lies ahead.


Financial Week has an interesting article called It's official-CEOs are worried.

According to the latest survey of CEOs conducted by the Conference Board, inflation concerns and credit market uncertainties have chief executives predicting that it will be tough to maintain profitability for the first half of the year.

The board's measure of CEO confidence fell to 39 in the fourth quarter of 2007, down from 44 in the third quarter. The last time the index fell below 40 was in the final quarter of 2000, back when the U.S. was entering recession. A reading of more than 50 points reflects more positive than negative responses.

Survey Highlights

  • "Chief executives' confidence in the U.S. economy has dropped to a seven-year low."
  • "Only 16% of the CEOs surveyed said they expected general economic conditions to improve over the first half of the year."
  • "Only 17% anticipate any improvement during the next six months or so in their own industry."

CEOs Reluctant to Hire or Raise Prices

It's quite clear CEOs cannot pass along all input price hikes. Reluctance to hire is a key point as well. This is a significant change in psychology and that change is now casting a wide deflationary net. Those without jobs will not be able to pay bills.

The consumer squeeze continues and price increases will be hard to hide.

Some merchants are already cutting prices to try to lure buyers. Williams-Sonoma (WSM), the U.S. gourmet-cookware retailer, yesterday reduced its fourth-quarter profit forecast following an unexpected decline in holiday sales. Management at the company said it has marked down merchandise and offered cheaper shipping at its Pottery Barn. This year may be "increasingly challenging," CEO Howard Lester noted.

Those manufacturers facing less price-sensitive demand are trying to pass rising costs to consumers. General Mills (GIS), the second-largest U.S. cereal maker, this week said it expects to raise prices later this year to recover higher dairy and wheat costs. The company raised prices on such products as Yoplait yogurt and Pillsbury refrigerated dough on Nov. 1 following increases earlier in the year

Same Old Story

There is absolutely no pricing power in things we want but do not need. However, there is still pricing power on things like food and energy that we absolutely need. It's not a very good environment for cash-strapped consumers. Nor is it a good environment for CEOs that overexpanded during the boom.

CEOs and consumers alike have solid reasons to be worried about what lies ahead. The big difference is that CEOs have golden parachutes, while cash-strapped consumers have nothing but debt to show for five years of artificial boom.


< Previous
  • 1
Next >
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Featured Videos