Executives’ Confidence in Economy Skids

Business leaders’ confidence in the U.S. economy has fallen sharply in the past few months and stands at a five-year low, the Conference Board said.

The group’s measure of business confidence closed at 47 in the final quarter of 1987, down from 59 in the third quarter. Sharp declines were registered in executives’ confidence about current and future economic conditions.

The business research group, which polled more than 1,000 executives for its quarterly survey, said worsening economic conditions were reported by all U.S. non-manufacturing industries and by 10 of the 15 manufacturing industries.

“Business leaders’ sudden pessimism breaks a chain of modest optimism that has lasted for well over a year,” said Steven Malin, Conference Board economist.

“These executives apparently believe that the stock market crash, persistent trade and budget deficits, and other uncertainties could make recession a reality in 1988.”

The “business expectations” index sagged to a seven-year low of 43 in the final quarter of 1987, down from 56 in the third quarter. Nearly half of the executives surveyed expect economic conditions to deteriorate in the first half of 1988.

The latest survey also showed sharp regional difference in confidence levels. On average, executives in New England, the Middle and South Atlantic states and the Pacific Coast report deteriorating business conditions in their states.

But more than half the executives in the Rocky Mountains and the Midwest report improved economic conditions, and they are more optimistic about future conditions in their areas.

Malin said the “subdued responses” in the East and other areas with dominant service industries reflected financial market turbulence and widely anticipated consolidations, mergers and downsizing in some segments of the service sector.

“At the same time, executives in the nation’s goods-producing heartland point to strengthening markets for manufacturing, mining and agriculture,” Malin said.