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Over 50% of CEOs Expect Recession

Over 50% of CEOs Expect Recession

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According to a business survey released on May 25, corporate executives overwhelmingly expect a recession ahead, CNBC reported.

The CEO sentiment measure showed that 57% of those surveyed expect inflation to drop “over the next few years.” However, there will be a “very short, mild recession.”

Low confidence, overall pessimistic tone

The responses reflect an overall pessimistic tone in this quarter. The measure of CEO confidence dropped to just above 40, down from 57 in the first quarter and the lowest since the beginning of the pandemic. This number measures how many people expect growth, so anything below 50 is a gloomy outlook.

According to Roger Ferguson, a trustee of The Conference Board which carried out the survey, the result “is consistent with slowing for sure.” He told CNBC’s “Squawk Box” in an interview after the report was released:

All of this is telling us that the combination of inflation that is much too high, to quote [Federal Reserve Chairman] Jay Powell, wages that are increasing but not keeping up with inflation, and then the inability to pass all this along is creating a very, very challenging dynamic.

He added:

The survey suggests that this set of circumstances is not likely to get better anytime soon and consequently pressures on the middle line and the bottom line for businesses, pressures on the household sector, pressures at CEO level, and, frankly, pressures on the Federal Reserve.

Not the only bad news

The report also showed that only 14% of CEOs believed business conditions had improved in the second fiscal quarter of the year, down from over a third in the first. Almost two-thirds said conditions had deteriorated, compared with just over a third in the prior reading.

Less than a fifth saw improvement ahead, down from half, while more than half expected things to get worse, up from less than a quarter.

Hiring expectations have improved

Almost two-thirds of CEOs said they expected to hire in the next quarter, a slight drop from Q1. However, four out of five said they were having problems finding qualified employees. More than 90% reported that wages would increase by more than 3% y/y.

Less than 40% expect to increase capital spending, down from almost half in the first quarter. One in five saw stagflation conditions of high inflation and low growth.

Powell determined to fight inflation

On Tuesday, Fed Chair Powell told The Wall Street Journal he would continue fighting inflation. Before the US Central Bank stops increasing rates, he would need to assure himself conditions have changed clearly and convincingly.