CEO confidence rises as recession fear dips; top concerns are...
Confidence among U.S. chief executives shot up during the third quarter as trade fears eased.
The Conference Board's Measure of CEO Confidence in collaboration with The Business Council rose to 49 in the third quarter, up 15 points from 34 In the second quarter. (A reading below 50 reflects more negative than positive responses.) The survey, which also gauges CEOs' expectations about future actions their companies plan on taking in capital spending, employment, recruiting and wages, was fielded from July 14-28.
All three components of the index improved from deep pessimism to near neutral, with CEOs' views on current economic conditions making the sharpest recovery. Their six-month expectations for the economy as a whole and in their own industries also improved. Fear of recession within the next 12 to 18 months fell to 36% in the third quarter from 83% in the previous one.
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"CEO confidence recovered in the third quarter after collapsing in Q2, but fell short of signaling a return to optimism," said Stephanie Guichard, senior economist, global indicators, The Conference Board. "The improvement is a continuation of the trend seen after tariff disputes between the US and China became less intense and potentially reflects ongoing progress on trade negotiations.”
CEOs ranked geopolitical instability and cyber threats as top concerns for their industry, while concerns about trade and tariffs eased somewhat.
"Notably, trade and tariffs risks receded in Q3 to third place among the top business risks impacting CEOs' industries, below geopolitical instability and cyber risks," said Roger W. Ferguson, Jr., vice chairman of The Business Council and chair emeritus of The Conference Board. “Slightly more CEOs reported some difficulty finding qualified workers than in previous quarters.""
In other findings, the share of CEOs expecting some reduction in the size of their workforce during the next 12 months rose for the fifth consecutive quarter, to 34%. For the first time since 2020, CEOs planning to shrink their workforce exceeded the share looking to expand (27%), though a majority continued to anticipate little change (39%, down from 44%).
"The share of CEOs planning to raise wages by 3% or more over the next year ticked up to 61% from 58% in Q2,” added Ferguson. “As in previous quarters, most CEOs indicated no revisions to their capital spending plans over the next 12 months. However, for a second consecutive quarter, the share of CEOs expecting to cut back investment plans was higher than the share expecting to upgrade them."
Asked where they faced increasing cost pressures, most CEOs cited suppliers (71%), materials (64%), and technology (63%). Wages came in fourth at 47%.
Regarding strategies to manage costs, CEOs overwhelmingly mentioned relying on technology to increase productivity (93%), negotiating with suppliers (89%) and upskilling their workforce (83%). These top strategies were followed by cuts in operating costs (73%) and pass-through to higher consumer prices (64%). Only 19% of CEOs planned to absorb higher costs in profit margins and very few planned to cut R&D.
Specifics from the report are below:
Current Conditions
CEOs' assessment of general economic conditions partially rebounded in the third quarter:
- 34% of CEOs said economic conditions were worse than six months ago, down from 82% in Q2.
- 22% said economic conditions were better, up significantly from 2%.
CEOs' assessments of conditions in their own industries also improved:
- 38% of CEOs said conditions in their own industries were worse than six months ago, down from 69% in Q2.
- 18% said conditions in their industries were better, up from just 7%.
Future Conditions
CEOs' expectations about the short-term economic outlook recovered to neutral in the third quarter:
- 30% of CEOs expected economic conditions to worsen over the next six months, down from 64% in Q2.
- 30% expected economic conditions to improve, up from 18%.
CEOs' expectations for short-term prospects in their own industries became slightly optimistic::
- 25% of CEOs expected conditions in their own industry to worsen over the next six months, down from 51%.
- 30% expected conditions in their own industry to improve, up from 18% in Q2.
Employment, Recruiting, Wages and Capital Spending
- Employment: 34% of CEOs expected a net reduction in their workforce over the next 12 months, up from 28% in the second quarter. The share of CEOs planning to expand their workforce ticked down to 27% from 28%, while 39% of CEOs planned to maintain the size of their workforce, down from 44% last quarter.
- Hiring Qualified People: Most CEOs continued to report no problems in hiring overall, but the share of CEOs reporting trouble hiring in key areas rose.
- Wages: Most CEOs (53%) planned to increase salaries by 3.0% to 3.9% over the next 12 months, unchanged from the second quarter.
- Capital Spending: 21% of CEOs expected to revise spending plans downward, down from 26% in the second quarter. But the share of CEOs expecting to increase capital spending also shrunk—to 15% in Q3 from 19% in Q2. Most CEOs (64%) indicated no plans to revise capital spending.
Cost Pressures:
Most CEOs report increased cost pressures from suppliers, as well as in materials and technology.
Managing Costs:
CEOs cite productivity-enhancing technology, negotiations with suppliers, and upskilling as their top strategies for managing costs, but nearly two-thirds (64%) also expect to raise consumer prices.
Founded in 1916, The Conference Board is a non-partisan, not-for-profit entity holding 501 (c)(3) tax-exempt status in the United States.
