Some 76% of CEOs globally expect a recession in in the next 12 to 18 months, according to The Conference Board’s 2022 outlook update, and 15% figure their region is already in a recession. The report compiles the findings from a survey of 750 CEOs and other C-suite executives conducted between May 10 and 24.
The war in Ukraine is accelerating strategy refinement and innovation, especially concerning cyber risk, supply chains, renewable energy, and crisis and contingency planning, the executives said.
“Historically high energy prices, renewed supply chain disruptions, heightened geopolitics risks, and eroding consumer confidence are all putting downward pressure on global growth,” said Dana Peterson, The Conference Board’s chief economist. “That’s on top of lockdowns in China and the cascading ripple effects of the war in Ukraine. These disruptions, along with restrictive monetary and fiscal policy decisions, are fueling recession expectations — with nearly 8 in 10 CEOs expecting their primary region of operations to be in recession within 12 to 18 months, if not already underway.”
Worries about slowing economic activity are also bearing out in consumer surveys. Americans’ consumer confidence has fallen to its lowest point since December 2020, according to the latest Forbes Adviser-Ipsos Consumer Confidence Weekly Tracker, which now stands at 49.8, down 3.2 from two weeks ago. That marks its steepest decline in almost five months.
Two in three Americans feel less comfortable purchasing both big-ticket items and other household goods than they were several months ago, according to the Tracker. As inflation continues to hit historic highs, majorities of Americans expect inflation, mortgage payments, monthly expenses, and taxes to continue to rise.
Only 9% of companies in The Conference Board global survey said the war will have no material impact on their business operations in the coming year, though all companies will be dealing with energy and food inflation.
Topics that are top of mind for C-suite executives when it comes to the impact of the war:
- Inflation through energy price volatility and higher costs for scarce inputs are leading to concerns over margin compression;
- The war is making executives more concerned about cyberattacks. Some 90% of CEOs are concerned to some degree about Russian retaliation through cyberattacks, with 44% highly concerned. That’s up from just 16% in the Conference Board’s January 2022 survey;
- They see an increased risk of competing economic blocs emerging. About 38% of CEOs see rising U.S.-China tensions as likely to have a major impact on their business operations in the coming 12 months; 83% fear the re-emergence of competing economic blocs.
- Most of the CEOs favor secondary sanctions against Russia even though they are concerned about the negative consequence of sanctions already in place;
- Many firms are taking a closer look at renewable energy as part of a longer-term growth strategy due to the energy price volatility related to the conflict;
Looking at long-term growth strategies in a volatile global environment:
- CEOs said they’re investing in digital transformation, developing new lines of business, upskilling and retraining existing employees, strengthening corporate culture, and increasing productivity in their hybrid work models to ensure growth in the next two to three years.
- When asked which government policy actions would most help their business to thrive, CEOs said they can best benefit from lower taxes, public investment, fewer regulations, and an effective government energy transition plan.
- To address labor shortages, the executives are seeking to improve their recruitment process and workplace flexibility, accelerate automation, and shift toward more contract workers vs. full-time employees.
Last week, May’s U.S. leading indicators fell 0.4% from April, as expected, fueled by falling stock prices, a slowdown in housing construction and gloomier consumer expectations.
SA contributor John M. Mason looks at the Fed’s actions to fight inflation.