America’s CEOs turned more cautious in September, downgrading their assessment of current business conditions for the first time since the Iran war began in March.
Chief Executive’s latest CEO Confidence Index, fielded September 1-3 among more than 150 U.S. CEOs, finds leaders rating current business conditions 5.6 out of 10, down roughly 6 percent from 6.0 in August.
It is the largest one-month decline since January, when confidence dropped sharply(-8 percent)amid uncertainty over Washington policy.
Still, even after thisSeptember retreat, the Indexremains2 percent above where it began the year androughlyinline with its 2026 average of 5.7.
“It seems to have gotten worse in a hurry,” saidtheCEOof a large manufacturing company, adding the war in the Middle East is“impacting consumer spending in USA more than the headlines appear to show.”
CEOs also lowered their expectations for the year ahead, though lesssharply. Their 12-month forecast declined 3 percent, to5.9from 6.1 in August.
That still puts expected conditions about 5 percent above today’s assessment. But the wider gapdoesn’treflect a surge in optimism about 2027. Rather,the dataindicatesthatCEOs’ view of present conditionshasdeteriorated faster than their outlook for what comes next.As one CEO wrote, “Things can’t get much worse from a disruption standpoint.”
The proportions expecting business conditions to improve, remain unchanged or deteriorate werevirtually identicalto August: 38 percent expect improvement over the next 12months,37 percent expectlittle changeand 25 percent expect conditions to worsen.
There are signs of caution farther down the middle market as well. Among CEOs running companies with $10 million to $24.9 million in annual revenue, 36 percent expect business conditions to deteriorate over the next year, compared with 25 percent of CEOs overall.That suggests caution is more pronounced at the smaller end of the middle market.
ECONOMIC OUTLOOK COOLS
The more notable shift in the September data isshowing up in CEOs’ expectations for the U.S. economy over the next six months.
Half now forecast economic growth, down sharply from 64 percent in August. Another 32 percent expect the economy to remain flat, while 18 percent foresee a slowdown—up from 11 percent last month and the highest share since May.
That leaves CEOsconsiderably lessconfident about near-term economic momentum than they were just a month ago.
Their comments suggest no single culprit,though demandremainsa major dividing line. Some CEOs continue to report strong pipelines and healthy spending in their markets. Others say customers are delaying purchases or pulling back.
“Demand remains strong, particularly across data centers, electrification, energy storage and critical power infrastructure,” said one industrial manufacturing CEO, whose overalloutlook isneverthelesstempered by supply-chain constraints, longer lead times and tariff uncertainty.
Justin Moore, CEOofMile Marker Industries,a small Florida-basedmanufacturer in the automotive industry, sees it asabifurcatedreality.“Premium buyers are stillspending,lower-end buyers are increasing,but the hardest negative sales impact has been that middle-class buyer.They are saving more, spendinglessand shifting down or up depending on their economics at home.”
Costs, tariffs, governmentpolicyand geopolitics also appear repeatedly in CEOs’ explanations for their tempered outlook, adding to inflation concerns.
“Pricing power iserodingand labor costs continue to increase well beyond headline inflation,” saidtheCEOof a Texas-based construction business.
Oneprofessional servicesCEO summedit upthis way: “Uncertainty and trade relationships continue to be crucial.Real costsbeingpassedto consumers, hurting the economy overall.If wedidn’thave some of this,the economy would be booming.Thefundamentals arestrong,the noise on top is a mess/wrench in the works for products and manufacturers. Full stop.”
PROFITS LOSE GROUND
Inflation expectations have changed littlein recent months.CEOs’ median forecast forheadlineCPI over the next 12 months is 3.5 percent, while the average forecast is 3.7percent,vs.August’s 3.6 percent.
Still,cost pressures arehighlyvisible in CEOs’ forecastsfor their respective companies:61percentof those polled in September expect to close 2026 withhigherprofits than in 2025, down from 69 percent in August and 67 percent in January.
Risingoperating expenses are part of the pressureandbecoming harder to ignore.Nearly eightin 10CEOs—78 percent—expect operating expenses tocontinue rising this year, up from 73 percent in August and 62 percent at the start of 2026.
“Inflationary pressure on labor and material continues to challenge gross margins,” saidInnovanceCEOMerritt Becker.“Accelerating demand offers some pricingopportunities,but timing lags inflation’s rate of increase.”
Michael McQueeney, presidentand ownerofhome improvement and hardware companyKR Johnson,whichoperateson the input side of the economy and typically leadsthe broader economy by 8-12 months,warns: “Manufacturers are bleeding down inventory and ordering lowerquantities. Price Increases are coming from every direction which will lead to overall inflation increases over the next 8-12 months.”
CONTINUED CAPEX
Despite those pressures, CEOs are not broadly pulling back on investment.Halfexpectto increase capitalexpendituresin the months ahead, compared with 45 percentwho said the sameat the beginning of the year.
Hiring is more restrained: 45 percent expect to increase headcount, down from 53 percent in January.
For many CEOs, this means increasinginvestmentin capacity and productivitytocontinue supportingtop-line growth.
“We are trying to navigate an environment where investment is clearly necessary to generategrowthbut capital to do so is virtually non-existent,” saidone PE-backed CEO.
AsAllen Krueger Jr.,president of Krueger Communications, a managed IT and cybersecurity company based in Southeast Wisconsin,explained, “Unpredictable forecasts means unpredictable results with unknown solutions to overcome. Relentless effort is all we have.”
Thisperhaps explainswhy revenue forecasts have held up better:73percentof CEOsexpect their companies to generate higher revenue in 2026 than in 2025—though that share is slightlydown from 75 percent in August and 76 percent at the beginning of the year.
