According to Wednesday’s closely monitored business survey, corporate executives have a negative view of the future. The majority expect a recession.
According to the Conference Board, 57% expected inflation to fall “over the next few decades” while the economy would experience a “very brief, mild recession.”
These results mirror a general pessimistic tone of the quarterly gauge. Measure of CEO ConfidenceIt fell to 42. That’s an impressive drop on the quarter’s 57. And it is the lowest reading since the start of the Covid epidemic. A negative outlook is anything below 50, which measures respondents’ expectations of expansion rather than those experiencing contraction.
Roger Ferguson, Vice Chairman of The Business Council, and trustee of The Conference Board told CNBC that this reading was consistent with “slowing for certain”.Squawk BoxIn an interview after the publication of this report.
This all tells us that both inflation and unemployment are much too high. [Federal Reserve Chairman] Jay PowellFerguson, who was previously Fed vice-chair, stated that while wages may be increasing, they are not keeping up to inflation. This creates a challenging dynamic.
Not only was the recession forecast reading bad, but so were the other negative news.
From 34%, only 14% of CEOs said that conditions were improving in Q2, an improvement from 34% the previous quarter. 61% said the conditions were worse than 35% of those who had reported it in the first quarter. Only 19% of respondents see improvements, compared to 50%. 60%, however, expect worsening, up from 23%.
A good piece of news was the fact that 63% anticipate hiring in the next quarter. That’s down only slightly from 66% Q1. However, some 83% of those polled said they had difficulty getting skilled workers. 91%, however, see their wages increasing by over 3% for the next year. This is a significant increase from the 85% reported in the first three-months.
A sharp drop from the 48% who expected to see an increase in capital expenditures, 38% now expects this, and only 38% will. 20% view stagflation as low growth with high inflation.
Powell in an interview TuesdayAccording to The Wall Street Journal, he is determined to reduce inflation and insists that conditions must change before the Fed raises rates or tightens monetary policy.
Ferguson stated that the survey suggests “that this set of circumstances will not get better anytime soon” and therefore pressures on businesses’ middle and bottom lines, household sectors, CEOs, as well as pressures on Federal Reserve.