Key Points

  • The Conference Board and the Business Council said CEO pessimism eased last month as the US-China trade war cooled, with concerns diminishing that the highest tariffs since the 1930s could trigger widespread economic turmoil.
  • In risk rankings, CEOs dropped tariffs from first to third place, behind geopolitical instability and cybersecurity risks. The survey showed concerns about a recession within the next 12 to 18 months plummeted from 83% in the second quarter to 36% last month.
  • "CEO confidence rebounded in the third quarter after collapsing in the second quarter, but has not yet reached optimistic levels," said Stephanie Guichard, senior economist for global indicators at The Conference Board, in a statement. "This improvement is a continuation of the trend following the easing of the US-China tariff dispute."

In-Depth Analysis

Private and public sector economists noted that risks from the Trump administration's tariffs have eased since April but still cast a shadow over price pressures, the job market, and the economic outlook.

St. Louis Fed President Alberto Musalem said last Friday, "Tariffs are pushing up inflation," keeping price increases persistently above the Fed's 2% longer-term target. He added, "Most of the inflation impact from tariffs is likely to be transitory and will fade once tariffs work their way through the economy, but there is a reasonable probability of some persistence in inflation."

The survey showed that 70% of CEOs reported facing price pressures from suppliers, 64% attributed rising costs to higher raw material prices, 63% cited technological factors, and 47% attributed them to wage increases. The share of CEOs planning to raise wages by 3% or more over the next year rose to 61% from 58% in the previous quarter.

"As in previous quarters, most CEOs reported no changes to capital expenditure plans over the next 12 months," said Roger Ferguson, vice chairman of The Business Council. "However, for the second consecutive quarter, a larger share of CEOs planned to cut investment spending than planned to increase it."

The Fed and other economists noted that the Trump administration's tariff policies, along with changes in regulation, immigration, and tax policy, have made the economic outlook uncertain this year, prompting companies to delay hiring and investment. A survey by the National Association for Business Economics last month found that about a quarter (27%) of companies plan to delay hiring or investment over the next six months.

"With high material costs and wages, companies are taking a more cautious approach to hiring and capital expenditures," said Emily Kolinski Morris, global chief economist at Ford Motor Company, in a statement.

Ferguson said the share of CEOs expecting to reduce their workforce over the next 12 months rose to 34%, marking the fifth consecutive quarterly increase. "For the first time since 2020, the share of CEOs planning layoffs exceeded the share planning to expand hiring," he said.

The survey also showed that about 90% of CEOs plan to control costs by deploying productivity-enhancing technologies; 89% will seek to negotiate acceptable costs with suppliers; and 83% plan to upskill employees. Only 19% of CEOs plan to absorb higher costs by cutting profits, and just 8% intend to reduce R&D budgets.