The Conference Board Measure of CEO Confidence fell sharply this quarter to levels not seen since the onset of the pandemic. The measure — which declined for the fourth consecutive quarter — has entered negative territory and is now at 42, down from 57 in the first quarter.
A reading above 50 points reflects more positive than negative responses.
“CEO confidence weakened further in the second quarter, as executives contended with rising prices and supply chain challenges, which the war in Ukraine and renewed Covid restrictions in China exacerbated,” said Dana Peterson, chief economist of The Conference Board. “Expectations for future conditions were also bleak, with 60% of executives anticipating the economy will worsen over the next six months — a marked rise from the 23% who held that view last quarter.”
The survey was conducted between April 25 and May 9. It included responses from 133 CEOs of mostly public companies.
A survey for the CEO confidence measure found only 14% of CEOs reported economic conditions are better compared to six months ago, down from 34% in the first quarter; 61% said conditions are worse, up from 35%. Looking forward, only 19% expect economic conditions to improve over the next six months, down from 50% in the first quarter, while 60% expected conditions to worsen, up from 23%.
When asked about the most likely outcome of the Federal Reserve’s tightening policy, nearly 60% of CEOs expect inflation will come down over the next few years, but the US will have a very short, mild recession which the Fed offsets (“reverse soft landing”), while 11% foresee a challenging recession. Twenty percent said inflation will stay elevated over the next few years, and US growth will slow significantly (stagflation).
CEOs also continued to be challenged by a tight job market this quarter. And even with decelerating hiring plans over the next 12 months, filling these open positions may be a struggle. The second-quarter survey found that 63% plan to expand their workforce, down from 66% in the first quarter. CEOs still report difficulty finding qualified workers; 80% report some problems attracting qualified workers, down from 83% in the prior quarter. Notably, 61% report difficulties that cut across the organization, rather than concentrated in a few key areas — down from 66%. As a result, the outlook for wages rose, with 91% of CEOs in the second-quarter survey expecting to increase wages by 3% or more over the next year, up from 85% in the prior survey.
“Amid historically low unemployment and record job openings, nearly 70% of CEOs are combating a tight labor market by increasing wages across the board,” said Roger Ferguson, Jr., vice chairman of The Business Council and Trustee of The Conference Board. “On top of that, companies are grappling with higher input costs, which 54% of CEOs said they are passing along to their customers. This may contribute to cooling in consumer spending heading into the summer.”