Jun 14, 2022 - Economy

Survey: CEO confidence falls, but isn't all bad

Business Roundtable CEO Economic Outlook Index
Data: Business Roundtable; Chart: Axios Visuals

How America's top CEOs are feeling about the economy depends on if you're a glass-half-full or half-empty type.

What's new: As of early June, the 177 leaders of America's biggest companies surveyed by the Business Roundtable (BRT) were still planning to hire and invest at high rates, according to data shared exclusively with Axios.

  • But their outlook deteriorated rapidly compared to early March — the sixth-fastest drop in the 78 quarters the survey has been conducted.

Why it matters: More executives pulling back on hiring and capital spending implies a slowdown in the last year's booming growth — and an economy that is more vulnerable to recession.

Details: The survey was fielded before last week's hotter-than-expected inflation print, the stock markets' plunge into bear market territory, and fresh signs the Fed is considering the steepest rate hike in 28 years. But the data points to more caution around hiring and capital expenditure plans, as well as sales forecasts.

  • 50% plan to increase employment levels in the next six months, down from 68% last quarter.
  • 47% say they will increase capital investment plans within that time frame, down from 60% last quarter.
  • 72% expect sales to increase in the next six months, 10 percentage points less than last quarter.

What they're saying: "The softening of quarterly CEO sentiment reflects uncertainty driven by the unprecedented times we face as a nation and global community," General Motors chief executive Mary Barra, who chairs the Business Roundtable, said in a statement.

Between the lines: In a way, the results hint at exactly what the Fed wants but may not be able to pull off: chilling demand to tame inflation, but without throwing the economy into a recession.

  • Softening expectations among executives are dragging the index down, but — for now — it remains above the levels that would signal a recession.

Josh Bolten, CEO of the BRT, said that Congress and the Biden administration should "pursue policies that alleviate inflationary pressures and promote long-term growth."

  • He urged the Biden administration to "double down on domestic energy investment" and lower tariffs.
  • Barra urged Congress to pass legislation that would fund the so-called CHIPS Act, a bill that passed with bipartisan support that would expand domestic semiconductor chip manufacturing capacity.
  • Over half (56%) of CEOs surveyed by the group said they either faced delays or challenges delivering goods to customers, higher costs, or both, thanks to a chip shortage.

The bottom line: Executives don't necessarily think an "economic hurricane" is coming, as JPMorgan Chase chief Jamie Dimon memorably said recently. But they are decidedly bracing for a slowdown.

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