SURVEY: Corporate CEO’s Bracing for Short, Shallow Recession

NEW YORK — A large and growing number of corporate CEO’s are preparing for what they believe will be a brief and shallow recession in the next 12 to 18 months, according to The Conference Board, the business membership and research group.

In a survey of CEO Confidence™ released Thursday in collaboration with The Business Council, a Washington-based association of chief executive officers, The Conference Board said the nation’s business leaders are feeling slightly less optimistic about the economy than they were earlier this year.

Based on the scale employed for the survey, CEO confidence rated a 42 for the second quarter of the year, down from a 43 in the first quarter.

According to the board, a reading below 50 reflects more negative than positive responses.

“After improving sharply to start the year, CEO confidence ticked down slightly in the second quarter and remains firmly in negative territory,” said Dana M. Peterson, chief economist of The Conference Board, in a written statement. 

“CEOs’ view of current economic conditions continued to be negative, with 55% of CEOs still reporting general economic conditions are worse than they were six months ago,” Peterson continued. 

“Meanwhile, future expectations deteriorated in the second quarter with 56% of CEOs expecting general economic conditions to worsen over the next six months, while 40% expect worse conditions in their own industry — up from 48% and 33%, respectively,” she said.

Of the 139 CEOs who participated in the latest survey, which was conducted between April 10 and 24, 93% said they are preparing for a U.S. recession over the next 12-18 months. 

Indeed, 87% believe the recession will be brief and shallow with limited global spillover and 6% expect a deep U.S. recession.

When it comes to future employment, only 33% of CEOs said they expected to expand their workforces over the next 12 months, down from 37% in the first quarter.

Forty-six percent of CEOs said they expect little change in the size of their workforce over the next 12 months, while 20% said they expected to see some reduction of their workforce.

One nagging problem appears to be continuing — employers across a range of industries say they are continuing to have trouble finding qualified people to fill their job openings.

The Conference Board found 52% of CEOs report having problems in this area, though that’s somewhat improved compared to the 57% who complained of the same phenomena in the first quarter.

Even so, 20% report difficulties that cut across the organization, rather than concentrated in a few key areas — up from 17% last quarter. Finally, 9% reported no problem hiring, up from 7% in the first quarter.

On the wages front, 75% of CEOs said they expect to increase wages by 3% or more over the next year, down slightly from 81% in the fourth quarter of last year.

As for capital spending, 27% of CEOs said they expect their capital budgets to increase over the next year, down from 30% last quarter.

“The more things change, the more they stay the same for CEOs in the second quarter,” said Roger W. Ferguson, Jr., vice chairman of The Business Council and trustee of The Conference Board, in a written statement.  

“Even as dramatic bank failures stoked fears of systemic breakdown, CEOs remain nearly unanimous in expecting a short and shallow U.S. recession ahead, with just 6% preparing for a deeper downturn with major global spillovers,” Ferguson said. 

“At the same time, CEO confidence remains appreciably higher than the depths seen last year. Meanwhile, leaders are acting to insulate themselves from the turmoil in U.S. and EU banks: 62% of CEOs are examining their firms’ banking relationships, and large numbers are also reviewing their firms’ risk management practices and liquidity adequacy — as well as those of customers and suppliers.”

Dan can be reached at [email protected] and at https://twitter.com/DanMcCue