Business leaders are skeptical of their outlook, with the majority now expecting a recession, according to a closely watched business survey released Wednesday.
The Conference Board’s measure of CEO sentiment showed that 57% of respondents expect inflation to decline “over the next few years” but the economy to experience a “very short, mild recession”.
These results reflect an overall pessimistic tone from the quarterly gauge, as the board’s CEO confidence measure fell to 42, a sharp drop from 57 in the first quarter and the lowest since the early days of the coronavirus pandemic. . Anything below 50 represents a negative outlook, as the number measures the level of respondents who expect expansion versus those who see contraction.
This reading “is certainly consistent with the downturn,” Roger Ferguson, vice chairman of the Business Council and trustee of the Conference Board, told CNBC’s “Squawk Box” in an interview after the report’s release.
“All of this tells us that the combination of inflation far too high to cite [Federal Reserve Chairman] Jay Powell, wages going up but not keeping up with inflation and then the inability to pass it all on creates a very difficult dynamic,” said Ferguson, a former Fed vice chairman.
The recession forecast reading wasn’t the only bad news in the report.
Only 14% of CEOs said business conditions had improved in the second quarter, compared to 34% in the first quarter. Similarly, 61% said conditions were worse, down from 35% the previous reading. Only 19% expect the situation to improve, compared to 50% previously, while 60% expect the situation to get worse, compared to 23%.
The good news is that 63% plan to hire in the next quarter, down slightly from 66% in the first quarter. However, some 80% said they had difficulty finding skilled workers, down slightly, while 91% see wages rise by more than 3% in the next year, compared to 85% in the first three months of the year. the year.
Additionally, only 38% expect to increase capital spending, a sharp drop from 48% previously. Some 20% see stagflation conditions of low growth and high inflation.
Powell said in an interview with the Wall Street Journal on Tuesday that he remained committed to tackling inflation, insisting he will have to see conditions change “in a clear and convincing way” before the Fed stops hiking. rates and tighten monetary policy.
Ferguson said the survey “suggests that this set of circumstances is unlikely to improve any time soon and, as a result, pressures on corporate interim and bottom lines, pressures on the household sector, pressures at the CEOs and, quite frankly, pressure on the Federal Reserve. ”
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