Coming on the heels of tough news showing inflation spiking to 8.6%, The Conference Board, a think tank measuring economic activity and the views of chief executive officers, says more than half of them they surveyed in the second quarter expect a recession as a result of the Federal Reserve’s money tightening policies.
“Nearly 60% of CEOs expect inflation will come down over the next few years,” The Conference Board said. “But they also believe that the interest rate hikes that will tame inflation will cause a recession – albeit a very brief, mild recession that the Fed offsets.”
The Conference Board also reported on Friday that 61% of corporate chiefs think general economic conditions were worse, up from 35% in this year’s first quarter.
“CEO confidence weakened further in the second quarter, as executives contended with rising prices and supply chain challenges, which the war in Ukraine and renewed COVID-19 restrictions in China exacerbated,” Dana M. Peterson, chief economist at The Conference Board, said. “Expectations for future conditions were also bleak, with 60% of executives anticipating the economy will worsen over the next six months – a marked rise from the 23% who held that view last quarter.”
Only 19% of the CEOs surveyed expect economic conditions to improve over the next six months, the survey of 133 CEOs found.
“Amid historically low unemployment and record job openings, nearly 70% of CEOs are combating a tight labor market by increasing wages across the board,” said Roger Ferguson, Jr., a trustee of The Conference Board. “On top of that, companies are grappling with higher input costs, 54% of CEOs said they are passing along to their customers.
“This may contribute to a cooling in consumer spending heading into the summer,” he added.
The Conference Board measures what they call “CEO Confidence,” which is the corporate chiefs’ measure of current and expected business and industry conditions.
“That measure now stands at 42, down from 57 in the first quarter,” The Conference Board said. “The Measure has fallen into negative territory and is at levels not seen since the onset of the pandemic.”
The Conference Board says a reading below 50 points reflects more negative responses than positive ones.
