CEOs’ rating of current business conditions also increased in August, by 6 percent since July, to 6.2 out of 10, bringing the Index back within “Good” territory. CEOs say they are seeing signs of easing in some of the biggest business challenges of the past few months. The war in Ukraine, new military threats in the South China Sea, rising interest rates, and high labor, material and energy costs remain concerns, but many of those polled see these issues beginning to abate and believe that will continue over the coming months.
“Inflation will begin to taper off, supply chain will have improved, energy prices will be under control as countries dependent on Russian oil will have begun to find alternative sources and adapt,” said Manuel Flores, president and CEO at SBA lender SomerCor. “There are major government-supported capital investments through recently passed infrastructure bill and soon to be passed semiconductor support bill that may catalyze additional private investment.”
“Normalized supply chains, reduced commodity prices, past peak inflation for this business cycle, companies committed to bring production back from China to the U.S. and Mexico in a big way,” said Brian Conner, president of IT staffing company Select Resources, to explain why he foresees business conditions to be “very good” (8 out of 10 on our 10-point scale) by this time next year.
“Supply chain issues, inflation and labor shortages remain a threat to profitability, and inventories remain high with many of our customers, which is reducing the number of orders we receive,” said Will Symonds, president of family-owned consumer manufacturer Oggi. “[But] my expectation is that these factors will ease over the coming year. We are already seeing early signs of improvement in freight and raw materials. Barring any major geopolitical events, I am slightly positive about the near-term outlook.”
Many also expect, by then, to be working through the backlogs and pent-up demand from today’s more conservative approach to growth due to economic conditions.
“Business is picking up, and our clients are looking beyond 2023,” said Jes Vargas, CEO of Sacramento, CA-based business consultancy DPMG—who also expects the business climate to be very good in 12 months.
Several others say they’re betting on the outcome of the midterm elections, which they hope will help bring more business-friendly members of Congress. Thomas Harrison, chairman emeritus of Diversified Agency Services (DAS), a division of NYSE-traded Omnicom Group, said his improving forecast—though only from a 4 to a 5 out of 10 over the coming months—is driving by “midterms bringing in statesmen and women who support business vs want to destroy business,” he said.
“Expected replacement of non-business-oriented Congress members and limits on the Executive Branch,” echoed Michael Bush, president of veteran-owned Energy Vision.
Recession Forecasts
For the past three consecutive months, Chief Executive has asked CEOs to share their near-term outlook for the U.S. economy. Is the U.S. in—or heading for—a recession? The answer to that question has wavered significantly from month to month—and not just among CEOs.
From 23 percent in June forecasting a recession by year end, to 44 percent in July, our August data finds 29 percent now saying they expect the U.S. to be or remain in a recession during that period. The most significant change, perhaps, is that while there is consensus that the U.S. economy is currently in either a recession or a slowdown (74 percent of CEOs), there is little agreement about what will unfold over the next 3 to 6 months:
Twenty-nine percent say the U.S. will remain in a recession in the second half of 2022, vs. 24 percent who expect a slowdown to continue, and 17 percent who forecast flat conditions. Interestingly, 11 percent now believe we’ll be in a recovery (up from 2 percent in July) and 8 percent expect the economy to be back in a growth cycle (from 0 percent the month prior)—and 5 percent chose to abstain from forecasting.
