Small business CEOs foresee a continued slowdown in the pace of economic growth and, amid record-high economic uncertainty, anticipate weak economic conditions to persist during the year ahead. The Q3 Vistage CEO Confidence Index, which surveyed 1,710 U.S. small business CEOs (September 8-19, 2011), was 83.5, down from 92.9 in Q2, and substantially below the 105.2 in Q1. The 20% decline over the past two quarters brought the Confidence Index to its lowest level in two years. The largest declines were in evaluations of the economy and, since the majority expects a stagnant economy during the year ahead, CEOs plan to trim their fixed investments and will likely curtail hiring plans. Revenues and profits are also expected to shrink. Along with pointing to a host of added regulatory burdens and expected increases in healthcare costs, the most important factor cited by CEOs for their decreased confidence was inadequate demand for their products or services.

Forty percent of the Vistage CEOs said that economic uncertainty is the most significant business issue they are facing; financial and staffing issues, each at thirteen percent, were cited as the next most significant business issues currently. "The principal challenge for CEOs today is how to navigate their businesses during an expectedly protracted period of uncertainty that makes them extraordinarily cautious to invest and to hire," saidRafael Pastor, CEO and Chairman of the Board of Vistage International, Inc.

Fifty percent of the Vistage CEOs blamed the President, the Congress, Democrats and Republicans—collectively—for a lack of leadership inWashington. Thirty-three percent blamed the President and the Administration alone, while seven percent blamed the Congress alone.

University of Michigan's Dr.Richard Curtin, who has directed the survey since 2003, stated: "While firms do not expect an outright recession, they anticipate that the economic growth will be very slow during the year ahead. As a result, they have curtailed investments and hiring, and anticipate smaller growth in profits. And considering that small business has been responsible for 75% of net new job growth in the U.S. over the past 15 years, if the current trend continues, it's unlikely the employment picture will improve between now and the 2012 election."

Economic Growth Sinks.Just 18% of all CEOs in the Q3 2011 survey thought the economy had improved, down from 37% in Q2 2011 and 63% in Q1. Most of the shift was toward the view that economic conditions had worsened, reported by 39% in the most recent survey, the highest level in two years. When asked about economic prospects for the year ahead, just one-in-five CEOs anticipated any improvement during the year ahead, well below the half who had expected overall gains in the economy at the start of 2011. While nearly one-in-four anticipated the economy to worsen, the majority of firms expected the economy would stagger along at the same slow pace during the year ahead.

More Cautious Investment Plans.Planned investments in new plant and equipment were reported by 37% of all firms in Q3, down from the recent peak of 48% at the start of 2011, falling back to the same level recorded in mid 2010. As an indication that firms expected a growth slowdown, not a renewed recession, just 15% reported that they planned cuts in the overall level of investments. Nonetheless, economic uncertainty has made firms more cautious about making additional investments.

Fewer New Hires Expected.Net increases in employment were planned by 46% of all firms in the Q3 survey, below the 54% recorded at the start of 2011, retreating back to the level recorded a year ago. However, hiring plans remained above the levels recorded during the 2008 and 2009 recessionary period. Just 10% planned to reduce employment, while 44% expected to maintain employment at current levels.

Revenue Prospects Slip.Revenue growth was expected by 62% of all firms in Q3, down from 76% at the start of 2011 and 67% in last year's 3rd quarter. Declining or flat revenues were anticipated by 38% of all firms. Given that 59% anticipated the prices they received would remain unchanged or decline in the year ahead, the expected revenue gains were based on the firm's forecast of increased sales volume that would be won in a more price competitive environment. The biggest challenges, reported by half of all CEOs, were finding and retaining customers and containing costs.

Profit Outlook Dims.Increasing profits were anticipated by 47% of all firms in Q3 2011, down from 57% at the start of the year. This is the smallest proportion to anticipate improving profits in two years. The primary problems cited were slow and uncertain economic growth and an inability to raise the prices for products or services.