B U S I N E S S P U
These days, sagging Confidence remain far more negative than the
isn’t Big News…and The Nicolet
Bank Business Pulse© conducted
immediately after Congress passed
its historic, gigantic, bailout bill
simply quantified the obvious.
The Big News is how far
CEO Confidence has fallen!
CEO The Nicolet Bank Business Pulse©
slid to 70.0 – almost 30 points
Confidence from 98.7 at the end of last quarter.
70.0 is the lowest point the index
Reaches has been since the inception of The
Business Pulse© - some 28 Quarters
ago (in 2001). 70.0 is down from
Record Low its previous low of 91.7 in the 4th
Quarter last year. This is the fifth
consecutive quarter in which the
index has been below 100, indicating
more negative views of the economic
conditions than positive views.
The Business Pulse measures Current
© 23% Increase | 35% Decrease
Economic Conditions compared to
three months ago - as well as Future
Economic Expectations of CEOs and
Business Owners over the next three
months. The Current Economic Index
and The Future Expectations Index
are then combined into the overall
Business Pulse Index.
Current Conditions Index and the
Future Expectations Index also
dropped significantly last month.
The Current Condition Index dropped
from 87.7 to the current level of 66.8,
and the Future Expectations Index
dropped from 109.7-to-73.1.
Current Conditions
CEO perceptions of the general
condition of the economy, and
the conditions in their own sector
Executive Summary:
End of Q3/08
“I’m not getting information; I'm not managing.”
John Torinus, President & CEO — Serigraph, Inc
L S E©
perception of any other aspect
of the Current Conditions Index.
Eight-of-ten CEOs indicate that
general economic conditions have
worsened in the past three months;
55% say that economic conditions
in their industry have worsened.
Of the economic indicators that
relate to their company (revenues,
profits, employment and capital
spending), all turned negative for the
first time since Nicolet Bank began
tracking this data 28 quarters ago.
PAST 3 Months CEOs say:
say:
General Economy
<1% Better | 84% Worse
Industry Economy
1% Better | 55% Worse
Revenues
Profits
24% Increase | 38% Decrease
Capital Spending
24% Increase | 36% Decrease
Employment
22% Increase | 24% Decrease
Future Expectations
For the first time in 28 quarters,
there are more negative than positive
views regarding the Future as well.
The Future Expectations Index fell
below the 100 baseline for the
first time - bottoming out at 73.1.
In June, The Future Expectations
Index was at 109.7.
On all six indicators, the percent
giving negative responses is up
from Q2/08. What is particularly
striking is that on the four
performance indicators (revenues,
profits, employment and capital
spending), CEO perception of the
next three months is substantially
more negative than their views of
the past three months. In other
words, CEOs sense that the worst
is not over. It may get worse
before it gets better.
NEXT 3 Months CEOs see:
General Economy
17% Better | 49% Worse
Industry Economy
14% Better | 50% Worse
Revenues
26% Increase | 41% Decrease
Profits
21% Increase | 45% Decrease
Capital Spending
14% Increase | 46% Decrease
Employment
14% Increase | 24% Decrease
National Comparisons
Nationally, CEO evaluations in
Q3/08 stayed about the same
as Q2/08 - according to The
Conference Board Measure of
Business Confidence conducted
from mid-August to mid-September
(released October 16, 2008). The
Conference Board CEO Confidence
Measure is now at 40 - essentially
unchanged from the 39 in Q2.
The Conference Board Measure
was taken before the full extent of
the Wall Street crisis was known.
The Conference Board Measure is
based on interviews of 100 CEOs
nationally; a score of 50 on the
Conference Board Measure of
Business Confidence indicates
the same percentage of Positive
and Negative responses. The
Conference Board measure is
similar to The Nicolet Bank
Business Pulse© where a score of
100 means an equal percentage
of Positives and Negatives.
The Conference Board’s Measure
of Consumer Confidence also
dropped - like a rock - to a
historical low. In January 2008,
the Consumer Confidence Index
stood at 87.9; in July, it dropped
to 51.9; it now stands at 38.0.
The base line for the Consumer
Confidence Index is 100. The
Expectations component of the
Index found that consumers are
particularly pessimistic about the
future. The Expectation Index
dropped from 61.5 in September
to 35.5 in October. Consumers
are most concerned about their
earnings and the possible increase
in inflation over the next few
months. These pessimistic views
among consumers are of special
concern in the retail market as
we enter the holiday shopping
period. Since consumer spending
accounts for approximately
70% of economic activity,
these pessimistic views among
consumers are troubling for
many segments of the economy.
When The Nicolet Bank Business
Pulse© is compared to the S&P 500,
some interesting results emerge.
From Q4/01-to-Q2/05, The Business
Pulse Index and the S&P 500 follow
very similar trends. (When the S&P
dropped, The Pulse Index dropped;
when the S&P 500 went up, The
Pulse Index tracked right along with
it.) However, beginning in Q3/05 -
and especially in Q3/06 - these two
indicators began to diverge. The
S&P 500 continued to climb while
the confidence of CEOs trended
downward. The gap remained fairly
wide until Q3/08 when both took
a dramatic downturn.
What explains this divergence
over the past few quarters? Is it
the exuberance that Wall Street
had in the market coupled with
the more pragmatic views of CEOs
on Main Street?
Summary
The confidence of CEOs in
northeastern Wisconsin experienced
a free fall at the end of the 3rd
Quarter. CEO confidence reached
its all time low, but even more
striking is the low level of optimism
about the future. In fact, many
CEOs feel the worst is not over.
The economic downturn is also
having substantial effects all
around the world. It appears we
may be in for a global - not just a
national - economic downturn.
And many questions remain: Are
there more shoes to drop? How
long will this downturn last?
Will the federal bailout legislation
have a substantial impact? What
additional governmental action
will be necessary? How will the
new administration handle the
mess? At this point, CEOs and
business leaders have far, far
more questions than answers.

How the Survey is Conducted

The Nicolet Bank Business Pulse© is a Quarterly Study of CEOs and business leaders in NE Wisconsin
(Brown, Calumet, Door, Kewaunee, Manitowoc, Marinette, Oconto, Outagamie, Shawano, Winnebago
Counties) and Menominee, Michigan. It is designed and implemented by IntellectualMarketing, LLC.
The survey was conducted between October 13–19, 2008. Participants include: 27% in manufacturing;
24% in services; 14% retail trade; 4% wholesale trade; 5% finance, real estate, insurance; 5% in
transportation, communications, utilities; 6% in construction; 14% in other industries. 22% have fewer
than 6 employees; 30% have 6-25; 15% have 26-50; 7% 51-100; 12% 101-250; 5% 251-500;
6% 501-1,000; 4% have 1,001 or more.
QUESTIONS to Dr. David G. Wegge (920) 217-7738; david@intellectualmarketing.com