9 out of 10 US CEOs Expect a Recession... Increasingly Negative Assessment of Business Conditions

[Asia Economy Reporter Jeong Hyunjin] As the U.S. Federal Reserve (Fed) continues its tight monetary policy in response to soaring inflation, it has been revealed that 9 out of 10 U.S. corporate chief executive officers (CEOs) expect an economic recession in the future.

On the 18th (local time), the non-profit economic research organization Conference Board announced the results of its Q2 CEO Confidence Survey. When asked about the outcomes of the Fed's tight monetary policy, 88% of respondents predicted a future economic recession in the U.S., including stagflation. This survey was conducted from the 25th of last month to the 9th of this month, targeting 133 U.S. corporate CEOs.

Among the CEOs who anticipated a recession in the U.S., there were differences in the specifics. 57% of respondents answered, "Inflation rates will decrease over the next few years, but the U.S. will experience a very short and mild recession." 20% of CEOs forecasted stagflation, where inflation remains high for several years while U.S. economic growth slows, and 11% expected the U.S. economy to face a severe recession.

Only 12% of CEOs predicted a soft landing where inflation is controlled without a recession.

The CEOs' economic outlook significantly worsened compared to the first quarter. The Q2 CEO Confidence Index released that day was 42, down 15 points from the previous quarter. This index indicates that if it falls below the baseline of 50, more CEOs have a negative outlook on the future economy. The CEO Confidence Index was the lowest since the early days of the COVID-19 pandemic. Dana Peterson, Chief Economist at the Conference Board, analyzed, "Due to the Ukraine war and China's COVID-19 lockdown measures, inflation rose and supply chain issues emerged, further weakening CEO confidence levels in Q2."

In fact, 61% of CEOs responded that business conditions worsened in Q2, a sharp increase from 35% in the previous quarter. The percentage of CEOs who said that business conditions in their respective industries deteriorated in Q2 was 37%, 15 percentage points higher than the previous quarter's 22%. CEOs expecting business conditions to improve dropped sharply from 50% in Q1 to 19% in Q2, while those expecting conditions to worsen surged from 23% to 60% during the same period.

Along with rising inflation, the possibility of increased labor costs and product prices was also raised. 91% of respondents said they would raise wages by more than 3% next year, an increase from 85% in Q1. Additionally, 54% of CEOs said they are effectively managing costs by passing on increased expenses such as raw material prices to customers.

Roger Ferguson, Vice Chairman of the Business Council, stated that companies are responding to the overheated labor market with wage increases and struggling with higher input costs. He noted that about half of the respondents are passing these costs on to customers, which could influence a cooling of consumer spending.

This content was produced with the assistance of AI translation services.