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Confidence Among CEOs Picked Up From 2022’s Lows, But Cautiousness Remains

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The Conference Board’s “Measure of CEO Confidence’” in collaboration with The Business Council stood at 43 to start 2023, up from 32 in the final quarter of 2022. The Measure’s improvement in Q1 2023 represents an uptick from the extreme weakness seen last year, which brought it to lows comparable to the depths of the COVID-19 recession in 2020. However, it is still below a reading of 50, which suggests CEOs remained cautious at the start of 2023. (A reading below 50 reflects more negative than positive responses.) A total of 142 CEOs participated in the Q1 survey, which was fielded between January 17-30 of this year.

In the survey, 93% of CEOs still reported they are preparing for a U.S. recession over the next 12-18 months (compared to 98% in the Q4 2022 survey). They also still expect that the recession will be brief and shallow with limited global spillover (86%). However, the percentage who are preparing for a deep U.S. recession dropped from 13% in Q4 2022 to 7% in Q1 2023, signaling that some CEOs are somewhat less pessimistic. Nonetheless, 55% of CEOs believe that a global recession is the greatest challenge for their companies.

“CEO confidence rose markedly between Q4 2022 and Q1 2023, but continued to signal a degree of pessimism among CEOs,” said Dana M. Peterson, chief economist of The Conference Board. “CEOs’ assessments of both current and expected economic conditions picked up from 2022’s extreme lows, but still are far from 2021’s peak. Roughly six in 10 CEOs still say economic conditions are worse than they were six months ago. However, the proportion of CEOs expecting economic conditions to worsen over the next six months declined sharply from 74% last quarter to 48% in Q1, with just 33% now expecting conditions in their own industry to deteriorate.”

“CEOs continue to see dichotomies in economic conditions and what it means for the future,” said Roger W. Ferguson, Jr., vice chairman of The Business Council and trustee of The Conference Board. “While CEOs are still girding for a recession in 2023, they continue to experience a tight labor market. Notably, 81% of CEOs plan wage increases of three percent or more, and most expect to either expand (37%) or maintain (44%) sizes of their payroll headcounts in the next 12 months. Cost pressures remain high, but there has been some easing in transportation and energy costs. Regarding managing elevated input prices, nearly six in 10 say they are passing higher costs on to consumers. Generally, going forward CEOs will monitor consumer price inflation and GDP as gauges of the health of the U.S. economy in 2023.”

Current Conditions

CEOs’ assessment of general economic conditions improved at the start of Q1:

• About 16% of CEOs reported economic conditions were better compared to six months ago, up from 5% in Q4.

• 55% said conditions were worse, down from 81%. CEOs were more optimistic about conditions in their own industries to start Q1:

• 23% of CEOs reported that conditions in their industries were better compared to six months ago, up from 15%.

• 43% said conditions in their own industries were worse, down from 52%.

Future Conditions

CEOs’ expectations about the short-term economic outlook improved to start Q1:

• 18% of CEOs said they expected economic conditions to improve over the next six months, up from 5% in Q4.

• 48% expected conditions to worsen, down from 73%. CEOs’ expectations regarding short-term prospects in their own industries also improved to start Q1:

• 26% of CEOs expected conditions in their own industry to improve over the next six months, up from 19%.

• 33% expect conditions to worsen, down from 54%. Employment, Recruiting, Wages, and Capital Spending

• Employment: 37% of CEOs expect to expand their workforce over the next 12 months, down from 44% in Q4.

• Hiring Qualified People: 57% of CEOs report some problems attracting qualified workers, somewhat improved compared to 68% in Q4. Of those, 17% report difficulties that cut across the organization, rather than concentrated in a few key areas - down from 39% in Q4.

• Wages: 81% of CEOs expect to increase wages by 3% or more over the next year, down slightly from 85% in Q4.

• Capital Spending: 14% of CEOs expect their capital budgets to increase by more than 10% over the next year, versus 10% last quarter.

The Conference Board is the member-driven think tank that delivers trusted insights for what’s ahead. Founded in 1916, it is a non-partisan, not-for-profit entity holding 501(c)(3) tax-exempt status in the United States.

For more information, visit conference-board.org.

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