Economic sentiment among CEOs of the country’s largest companies plunged to its lowest level in more than two years as a recession appears increasingly likely, according to a 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. It also marks the first time it has dipped below its long-run average since that quarter.
<mediadc-video-embed data-state="{"cms.site.owner":{"_ref":"00000161-3486-d333-a9e9-76c6fbf30000","_type":"00000161-3461-dd66-ab67-fd6b93390000"},"cms.content.publishDate":1670265796609,"cms.content.publishUser":{"_ref":"0000017f-e2f4-de00-a7ff-e7fff8030000","_type":"00000161-3461-dd66-ab67-fd6b933a0007"},"cms.content.updateDate":1670265796609,"cms.content.updateUser":{"_ref":"0000017f-e2f4-de00-a7ff-e7fff8030000","_type":"00000161-3461-dd66-ab67-fd6b933a0007"},"rawHtml":"
var _bp = _bp||[]; _bp.push({ "div": "Brid_70029930", "obj": {"id":"27789","width":"16","height":"9","video":"1199359"} }); ","_id":"00000184-e399-d791-abd4-ffdd71b60000","_type":"2f5a8339-a89a-3738-9cd2-3ddf0c8da574"}”>Video Embed
“With continued supply chain challenges and inflation uncertainty, many CEOs remain cautious about domestic plans and expectations for the next six months,” said General Motors CEO Mary Barra, chairwoman of Business Roundtable. “We urge U.S. policymakers to position America for the strongest economic recovery possible. Sound policy action in the short term will yield long-term economic benefits and lay a solid foundation for our growth and competitiveness.”
The results of the fourth-quarter survey, which was conducted among 142 CEOs between Oct. 31 and Nov. 28, showed a decline from a peak in the fourth quarter of last year, when sentiment among the country’s chief executives was the highest in years of conducting the survey.
WHY CONSTRUCTION JOBS ARE UP DESPITE HOUSING ‘RECESSION’ – AND WHY IT WON’T LAST
Plans for capital investment among the CEOs decreased by 7 points, while expectations for sales decreased by 8 points. The biggest drop came in the employment category, in which plans for hiring fell by a precipitous 17 points.
The CEOs were also questioned about the biggest cost pressures their companies are facing. Nearly half of the CEOs identified labor costs as the top cost pressure, followed by 15% who identified material costs and 14% who cited costs related to supply chain disruptions. Energy and regulatory costs were other cost pressures that were raised.
“The Fed has been pumping the brakes to rein in inflation, and the survey results are unsurprising in that context,” said Business Roundtable CEO Joshua Bolten.
The Federal Reserve has been cranking up interest rates in an aggressive fashion all year. Since the start of the year, the central bank has jacked up rates by a massive 375 basis points in an effort to quell the country’s explosive inflation.
The rate increases are designed to slow the economy and cool it down to the point at which price increases slow, but a side effect of that tightening is that the economy might end up cooling too much, too fast, and slide into a recession.
Many economists are forecasting a recession at some point next year, although the duration and severity of that downturn are still yet to be seen.
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
In a recent analysis, PNC chief economist Gus Faucher said that the baseline forecast for next year features a “mild” recession, with the unemployment rate climbing to about 5.5% by early 2024. Minus the pandemic, that would mark the highest unemployment rate in more than five years.
“Looking ahead, we expect job growth to continue to eventually stall in 2023 and expect outright job losses starting in 2023 Q2, when we expect the economy to enter a mild recession. We expect the unemployment rate to rise about 1ppt to next year,” said economists with Oxford Economics.
