CEO Confidence Improves as Interest Rate Cut Fuels Economic Optimism: Survey

Small and midsize business (SMB) CEO confidence increased in Q3 with the Vistage CEO Confidence Index rising to 85.1.

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Small and midsize business (SMB) CEO confidence increased in Q3 with the Vistage CEO Confidence Index rising to 85.1. Responses were captured in a survey conducted by CEO coaching and peer advisory organization Vistage just before the Federal Reserve announced interest rate cuts. The Q3 results marked a modest rise from the previous quarter, though below the 2024 high of 85.9 and significantly below pre-pandemic levels.

Despite the slight uptick in confidence, challenges that impacted businesses in the first half of 2024 persisted into the third quarter. While inflation has decreased gradually, the costs of goods and services remain elevated. Interest rates started to fall; however, 60% of CEOs indicated that they do not expect these cuts will impact their businesses until 2025. Hiring has become easier for more SMBs, and employee retention rates have stabilized as workforce velocity slowed.

"Another quarter has passed with only incremental movement in CEO sentiment. However, there is new light at the end of the tunnel: interest rate cuts," says Joe Galvin, Vistage's chief research officer. "CEOs are homing in on productivity to navigate ongoing economic challenges. Following the Federal Reserve's recent cuts, there's optimism that businesses can invest strategically in efficiency and innovation, setting the stage for sustainable growth and enhanced workforce engagement. The organizations best positioned for success are preparing for the anticipated growth cycle in 2025."

 Key Takeaways:

  • Vistage has measured SMB CEOs' sentiment on various economic and business factors every quarter since 2003. Analysis using ITR Economics' rate-of-change methodology has revealed the Vistage CEO Confidence Index to be a leading indicator of the U.S. Industrial Production Index nine months in advance.
  • Nearly one-third (32%) of SMB CEOs expect the economy to improve in the next 12 months, the highest level since the pandemic, while only 23% expect it to worsen.
  • 30% of CEOs indicated they would feel the impact of a quarter-point (12%) or half-point (18%) interest rate cut.
  • Most said they would need an interest rate cut of either a whole point (31%) or two percentage points (14%) to see the impact on their business.
  • When asked how long it would take for their business to realize the effect of an interest rate cut, 23% reported less than three months, 28% reported 3-6 months, 23% reported up to one year, and 9% reported more than one year. (Note: Vistage collected this data immediately before the Federal Reserve's interest rate cut announcement).
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