UNIVERSITY OF RICHMOND - The first quarter 2020 CEO Economic Outlook Survey by the University of Richmond's Robins School of Business and the Virginia Council of CEOs finds that fewer than 7% of Virginia CEOs expect sales, capital spending, or employment to increase over the next six months. Overall, expectations at the end of the first quarter of 2020 were the lowest seen in the survey's 10-year history, producing the first-ever negative index.

More than 87% of CEO respondents expect sales to be lower over the next six months, and more than 71% expect the decline to be more than 10 percentage points. Only 6.9% expect sales to increase, while 5.9% expect sales to remain flat. 

Eighty-two percent of CEOs expect capital spending to decrease, while only 4% expect capital spending to increase over the next six months. Fourteen percent expect capital spending to remain flat. 

Fifty-four percent of respondent CEOs expect employment to decrease over the next six months. Forty percent expect employment to remain flat, and 6% expect an increase in employment. 

Scot McRoberts, executive director of the Virginia Council of CEOs, is in constant communication with Virginia CEOs. “I’ve heard from several small and mid-sized business CEOs that it is like someone turned off the faucet. Suddenly last week, no one is calling, no one is buying. Some of these businesses will go under,” said McRoberts. 

Because of the current crisis, CEOs were asked several questions that related specifically to COVID-19. More than 50% believe that they have been able to quickly adapt to the disruption caused by COVID-19 so that they will continue to operate without significant layoffs, but 14% believe that significant layoffs are “probably” (9%) or “definitely” (5%) likely. Thirty-two percent are still uncertain at this time.  

CEOs were asked in what ways COVID-19 has caused them to change products, markets, or customers. Many have moved to virtual offerings and interactions, but many others are not able to make changes and are trying to cope with expected declines in sales. As one wrote, “We are just slow…less business.” A few are lowering prices to encourage sales. 

When asked what “other extraordinary steps your business is taking,” nearly all mentioned remote work and sanitation/cleaning/health guidelines. As one CEO responded, “Cleaning...all the time. Working from home for those who can.” A few mentioned pay cuts and furloughs, and those in business-to-business markets emphasized the importance of continued client contact.

When asked what state and federal governments could do to help small businesses through the crisis, there is a clear consensus that in order to remain in business tax relief and low- or no-interest loans are required. CEOs desire to keep their employees rather than release them to unemployment programs. 

The Robins School and VACEOs jointly conduct the quarterly survey, which regularly asks about expectations for sales, capital spending, and employment, plus other relevant issues, helping Virginia companies anticipate business conditions and plan for growth. The Robins School adapted the survey from the Business Roundtable, an association of CEOs of American companies that conducts a similar survey nationally. Randy Raggio, associate dean at the Robins School, administers the survey and collects the responses each quarter. The survey has been administered quarterly since 2010.

The following survey results from the fourth quarter of 2019 and first quarter of 2020 show projections for the next six months for sales, spending and employment:

Projected 6 months sales, spending and employment

 

 

2020 Q1

2019 Q4

Increase

No Change

Decrease

Increase

No Change

Decrease

How do you expect your company’s sales to change in the next six months?

 6.9%

 5.9%

 87.1%

 71.4%

 22.1%

 6.5%

How do you expect your company’s U.S. capital spending to change in the next six months?

 4.0%

 14.0%

 82.0%

 42.1%

 50.0%

 7.9%

How do you expect your company’s U.S. employment to change in the next six months?

 6.0%

 40.0%

 54.0%

 56.6%

 42.1%

 1.3%

“We have never seen such a complete reversal in CEO sentiment. Just last quarter, CEOs seemed optimistic for a continued strong economy,” said Raggio. “Now, everything has collapsed and none has any certainty about the future.”  

However, McRoberts believes that “many will find a way through this crisis by relying on reserves, scaling back, and innovating within the current environment.” He assures VACEO members, “We are working hard to help our CEOs stay connected so that they can help one another.”

Mickey Quiñones, dean of the Robins School of Business, noted, “The sentiment expressed by these executives is consistent with what we have heard in our own conversations with business leaders over the last couple of weeks. One of the great things I have learned in my short time in the Robins School is that our faculty are viewed as valuable experts in all kinds of economic conditions, and we are ready to help them through this crisis.”

Economic Outlook Index

Survey Date

CEO Economic Outlook Index

Q1 2020

-18.73

Q4 2019

101.47

Q3 2019

86.33

Q2 2019

94.13

Q1 2019

100.5

Q4 2018

97.97

Q3 2018

104.3

Q2 2018

92.73

Q1 2018

94.6

Q4 2017

106.3

Q3 2017

99.17

Q2 2017

103.63

Q1 2017

108.97*

Q4 2016

107.37

Q3 2016

89.67

Q2 2016

89

Q1 2016

102

Q4 2015

92.67

Q3 2015

99.8

Q2 2015

93.42

Q1 2015

93.9

Q4 2014

95.92

Q3 2014

96.1

Q2 2014

88.71

Q1 2014

86.07

Q4 2013

89.57

Q3 2013

92.53

Q2 2013

91.6

Q1 2013

86.4

Q4 2012

77.57

Q3 2012

81.17

Q2 2012

81.13

Q1 2012

94.1

Q4 2011

88.63

Q3 2011

81.17

Q2 2011

74.17

Q1 2011

85.63

Q4 2010

92.27

Q3 2010

94.47

Q2 2010

81.33

* Record high

One hundred and one CEOs responded, the largest number of respondents in the history of the survey, which was administered March 18-23. Multiple industries are represented in the sample, including construction, manufacturing, finance, insurance, and retail. The average company whose CEO responded to this survey had about $11 million in revenue for the most recent 12-month period. The average employment was about 57.

The Council continues to expand the survey beyond its members, offering any area business owners whose companies gross at least $1 million in annual revenue the opportunity to participate. If enough businesses participate, the Council will provide survey results by industry. Participation is free, and all participants will receive copies of the survey data. 

Business owners and CEOs who would like to participate in the next survey should contact Scot McRoberts at smcroberts@vaceos.org.

The Virginia Council of CEOs is a nonprofit association whose mission is to connect the CEOs of small and mid-sized businesses for learning and growth. The Council is led by a volunteer board of directors, advisory board and a small staff. Currently, there are 215 CEO members, mainly in Richmond and Charlottesville. Learn more at www.vaceos.org.

The Robins School of Business is the only fully accredited, highly-ranked undergraduate business school that also is part of a highly-ranked liberal arts university. U.S. News ranks the Robins School’s MBA program #2 in Virginia. The school’s executive education division offers customized training and consulting to area businesses.

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