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YPO: China's Financial Data Contributes to Decline in Economic Confidence of U.S. CEOs

IRVING, Texas, Nov. 3, 2015 (GLOBE NEWSWIRE) -- Based on a survey of 797 young CEOs, economic confidence
continues to erode amid fears over China's economic data

The YPO Global Pulse Index of CEO economic sentiment for the United States continued its steady fall with a decline of 2.9 points to a decidedly less optimistic 59.9 in the third quarter. This is the third consecutive decline after reaching a peak of 65.0 in January. Fears about the extent of the slowdown in the Chinese economy, its impact on developing countries in Asia, the drop in commodity prices, and the ongoing debate about the timing of the Fed's first rate hike, are taking a toll. While not dramatic, there has been a steady erosion of confidence by YPO members in the United States for almost a year.

U.S. exports are expected to decline by 5% this year in response to the 15% increase in the value of the dollar over the past 12 months. The dollar's strength appears to be a consequence of global uncertainty, while the Federal Reserve is poised to raise rates along with central banks around the globe. As the dollar rises, U.S. goods become more expensive for foreigners to purchase leading to a decline in exports.

Additionally, China continues to struggle as it transforms from an industrial-based economy to a consumer-driven model. GDP growth in China has slowed markedly from a double-digit pace a few years ago, with any further growth expected to slow. The concern about China is accentuated because many economists question the validity of the reported data and wonder if Chinese GDP growth could be slowing even more sharply than expected. Global angst about China has seen stock markets around the globe fluctuate.

"The problem is that growth is not uniformly distributed across all sectors of the economy. Consumer spending and housing are relatively robust, but manufacturing and trade are contracting. So whether the economy is doing well, terrible, or somewhere in the middle depends upon whom you ask," said Sunny Vanderbeck, managing partner at Satori Capital and a member of the YPO North Texas Chapter. "Taken as a whole, the economy seems to be doing fine, but that masks divergent movements amongst sectors. Additionally, what is happening in China is making everyone around the world nervous - and it should. China is the world's second-largest economy. The slowdown in the Chinese economy has a direct impact on developing countries in Asia and a drop in commodity prices," noted Vanderbeck.

Globally, the index declined for the fifth consecutive quarter, dropping 2.8 points in October to 58.1, which appears to be consistent with moderate growth in the quarters ahead. While each of the previous declines was modest, the October drop was more pronounced as concerns about slower growth in China, falling commodity prices, jittery stock markets around the globe, and an increase in interest rates by the Federal Reserve combined to make YPO members nervous. While confidence fell in every region around the world, the most pronounced drop was in Asia.

Key Findings in the United States

U.S. CEOs are decidedly less optimistic compared to six months ago. When asked to evaluate economic conditions today compared to six months ago, YPO members in the U.S. were less optimistic with 26% reporting that conditions have worsened, compared to 18% in July. This erosion of confidence was most evident at firms in the production industry, which have been hit hard by the drop in oil prices and the decline in exports. Because of their exposure to overseas developments, large firms were far more affected in the past six months than their medium and small counterparts.

Global uncertainty will continue to erode U.S. CEOs' confidence in the near future. When looking ahead six months, 35% of U.S. survey respondents thought the economy would improve compared to 47% in July. In fact, 19% of the respondents thought economic conditions would deteriorate in the next six months while just 12% thought that would be the case in July.

U.S. confidence fell in all three of the categories - sales, fixed investment and hiring - that help determine the overall confidence index. The sales index dropped 2.2 points, from 69.0 to 66.8; employment declined 2.0 points, from 60.7 to 58.7; and fixed investment slipped 2.2 points, from 62.3 to 60.1.

YPO Global Pulse Confidence Index

The quarterly electronic survey, conducted in the first two weeks of October 2015, gathered answers from 1,915 chief executive officers across the globe, including 797 in the United States. Visit www.ypo.org/globalpulse for more information about the survey methodology and results from around the world.

About YPO

YPO (Young Presidents' Organization) is a not-for-profit, global network of young chief executives connected through the shared mission of becoming Better Leaders Through Education and Idea ExchangeTM. Founded in 1950, YPO today provides 23,000 peers and their families in 130 countries with access to unique experiences, extraordinary educational resources, access to alliances with leading institutions, and participation in specialized networks to support their business, community and personal leadership. Altogether, YPO member-run companies employ more than 15 million people around the world and generate US$6 trillion in annual revenues. For more information, visit www.ypo.org.

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Contact:
YPO (Young Presidents' Organization)
Linda Fisk
Office: +1.972.629.7305 (United States)
Mobile: +1.972.207.4298
press@ypo.org

HUG#1942257

Source:Young Presidents' Organization, Inc.