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Is it the best of times or the worst of times? Well, after back-to-back monthly increases in optimism, Chief Executive’s CEO Confidence Index, which measures CEOs’ outlook for business over the coming year, dipped 3 percent in October, settling at 5.75 on a scale of 1-10, down from 5.92 in September. So, maybe it’s still a bit of both?
CEOs we polled October 4-6 say they are seeing signs of a slowdown in spending and cite rising energy costs, a shortage of labor, continued supply chain issues, reduced access to capital and the reality of a potential recession/stagflation on the horizon as major headwinds.
Overall, 48 percent of the 166 respondents forecasted that business conditions would worsen over the coming year, up from 39 percent in September. Only 24 percent now expect things to have improved by fall 2023, down from 32 percent at this time last month. Unpacking the numbers a bit:
- Revenues. 69 percent expect revenues to increase over the next 12 months, 4 percent lower than in September and 21 percent less than when we started the year.
- Profits. 53 percent of CEOs say they expect profits to be up by this time next year—6 percent fewer than in September and 26 percent less than in January.
- Cost cutting. 78 percent of the CEOs we polled expect to cut costs across various areas of the business in response to rising wages and overall inflation pressures.
- Workforce. 48 percent intend to add to their workforce in the year ahead—up 4 percent month over month and the first increase we’ve seen in this metric since May.
- Capital expenditures. 45 percent of CEOs say they intend to have upped spending by this time next year. That proportion is 8 percent higher than in September, though it remains 27 percent lower than in January. Like labor, it is the first time we record an increase in that area since May.
“Capital equipment investment is still strong. Supply chain pressures are easing. Labor market is easing. I believe the Fed has made their impact and will start to slow/ease rate hikes,” said David Cox, CEO of industrial manufacturer The Bradbury Group. “I think if we get government spending under control with a change in Congress and the Fed stops rate hikes, we will have inflation under control and the overall economy will be fine. CapX and infrastructure spending will be a boon to our U.S. economy.” Read the full report >
— Melanie Nolen, research editor, Chief Executive Group. mnolen@ChiefExecutiveGroup.com
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