Economic sentiment among CEOs of the country’s largest companies fell to its lowest level in two years as fears of a recession grow, according to a new survey.
The combined index of CEO expectations for capital expenditures, employment, and sales hit its lowest level since the third quarter of 2020 in Business Roundtable’s much-anticipated quarterly survey of chief executives.
“Global economic uncertainty continues to temper CEO sentiment for domestic plans and expectations, as reflected in this quarter’s survey results. In the face of ongoing economic and geopolitical challenges, U.S. policymakers should pursue pro-growth policies that will strengthen the economy and generate upward mobility for all Americans,” said General Motors CEO Mary Barra, chairwoman of Business Roundtable.
INFLATION FELL TO 8.7% IN AUGUST, ACCORDING TO PRODUCER PRICE INDEX
BRT CEO Joshua Bolten discussed the results with reporters in Washington, D.C., on Wednesday afternoon alongside Lynn Good, the president and CEO of Duke Energy Corporation.
“I think the survey results … underscore the need for continued growth and strengthening of the economy,” said Good.
The results of the third-quarter survey, which was conducted among 170 CEOs between Aug. 12 and Sept. 7, showed a decline from a peak in the fourth quarter of last year. During that quarter, sentiment among the country’s chief executives was the highest in years of conducting the survey.
Among the three subindices, plans for capital expenditures and employment were above the long-run average, but expectations for sales for the next six months were underwater.
The Federal Reserve has embarked upon a historic cycle of raising interest rates, which is designed to quash inflation by dampening demand. During Wednesday’s news conference, Bolten was asked if members have indicated whether they have seen evidence of the Fed weakening demand.
“The members are seeing a weakening in demand, and it’s reflected in their expectations for sales, which are down fairly substantially,” said Bolten, noting that the data on sales show that CEO sentiment is “well below” average.
The Fed has raised rates twice by 75 basis points so far this year. The first hike marked the most aggressive increase since 1994, and another jumbo rate hike is expected following the Federal Open Market Committee’s meeting next week.
Investors now see a 72% chance of a 75-basis-point hike and a 28% chance that the Fed will go even further and raise rates by 100 basis points at once, according to CME Group’s FedWatch tool, which calculates the probability using Fed fund futures contract prices.
Bigger and more frequent rate hikes bring about concerns about a recession. Bolten on Wednesday said the CEOs he has talked to give mixed responses as to whether they think a recession is inevitable. He said, though, that all of BRT’s member CEOs are preparing for a scenario in which the current economic downturn gets sharply worse.
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Investors are also growing more concerned about a recession and began offloading assets on Tuesday after August’s consumer price index readings came in hotter than most economists had predicted.
The Dow Jones Industrial Average shed more than 1,200 points on Tuesday, the seventh-biggest decline in points in U.S. history. The tech-heavy Nasdaq composite plunged by more than 5%, and the S&P 500 had about 4.3% of its value erased following the report.
