As CEO concerns about the US economy continue to mount, CEOs remain just as worried as any other American. The Business Roundtable, an association of America’s CEOs, released a survey on Monday which showed that CEO confidence was the lowest that it had been in over two years. The Roundtable stated that the results “signal CEOs remain cautious amid persistent domestic and global economic headwinds, including high inflation and the Fed measures required to tame it.”
The Economic Outlook Survey operates on a -50 to 150 scale. A figure below 50 indicates economic contraction while above 50 indicates economic expansion. The figure fell to 73.3 in the fourth quarter of 2022, down 11 points from the previous quarter and nearly 50 compared to the 2021 fourth quarter. The 2021 fourth quarter was a record high, but confidence has steadily dropped ever since. It should be noted that the fact that the Economic Outlook Survey remained above 50 does indicate that CEOs do expect growth rather than contraction in 2023.
That dropping confidence encapsulates a year that began with much promise, but which has seen so much difficulty. On the one hand, unemployment has remained low, and the recent US jobs report surpassed expectations. But this has caused labor costs to rise, acting as a further inflationary pressure. Business Roundtable stated that 49% of CEOs identified labor costs as the top cost pressure, far ahead of concerns about material costs and supply chain disruptions.
But those concerns have also been a further drag on the economy. China’s zero-COVID policy and the resulting protests, the war in Ukraine, and the decline in finance and technology companies have been further negative pressures. The Federal Reserve has been raising interest rates to act against inflation, but this has limited easy money for companies and even prompted fears of the stagflation of the 1970s returning.
Are CEOs right to expect further economic difficulties in 2023? Economic analysts and banks do believe that 2023 will continue to be a difficult year. Morgan Stanley states that it expects a global GDP growth of 2.2% and a US growth of just 0.5%, citing inflation and other difficulties that have plagued the US in 2022. But inflation is expected to curb towards the end of 2023, and there is hope of a soft landing and more economic stabilization.
Business Roundtable says that these difficulties can be alleviated with the right public policy. The association said that Congress should resolve the upcoming debt ceiling battle as soon as possible and undertake pro-growth policies “including restoring full and immediate expensing of American R&D investments this session and reforming the permitting system to expedite energy infrastructure projects.”
CEO Concerns Remain High
Congress and businesses will have their work cut for them as CEO concerns remain high. Balancing inflation, worker demands, customer demands, and many other factors will be critical for the US not to enter a full-blown recession or stagflation. And despite hopes that inflation will curb towards the end of the year, there have been earlier predictions that inflation would be gone by now. Whether inflation will be truly alleviated remains to be seen.