Key Findings

  • A survey by the Conference Board and the Business Council shows that CEOs' expectations for the economy turned pessimistic this quarter, with major concerns over persistent inflation leading to an economic slowdown.
  • The survey results show that 64% of CEOs expect a mild economic slowdown over the next 12 to 18 months, with price pressures slightly rising. 38% of CEOs expect economic conditions to worsen over the next six months, up from 30% in the third quarter.
  • "CEOs' expectations for the economy have shifted from neutral to pessimistic," said Stephanie Guichard, Senior Economist for Global Indicators at the Conference Board, in a statement. "Geopolitical instability and cyber risks continue to dominate the major business risks affecting CEOs' industries."

Deeper Analysis

In recent years, economic forecasting has been particularly difficult, as robust gross domestic product growth has defied widespread predictions of a recession. Current estimates for future growth vary widely.

For example, the Federal Reserve Bank of Atlanta last Friday raised its estimate for third-quarter growth from 3.8% to 3.9%, while the Conference Board on Thursday estimated third-quarter growth at 1.9%.

The government shutdown, now approaching its third week, has further complicated forecasting. The federal government failed to release September unemployment and retail sales data this month, which could have provided insights into the health of consumer spending, which accounts for about 70% of economic growth.

The release of September consumer and producer price data has also been delayed, data that is "crucial for assessing the impact of higher import tariffs and progress on inflation returning to the Fed's 2% target," Federal Reserve Governor Christopher Waller said in a speech on Thursday.

Waller noted that with stable economic growth, the labor market is showing signs of weakness, which also makes the outlook harder to clarify.

"There has to be a trade-off—either the economy slows to match the weaker labor market, or the labor market rebounds to match stronger economic growth," Waller said. "Since we don't know how the data will resolve this conflict, we need to act cautiously when adjusting policy rates to ensure we don't make costly and hard-to-correct mistakes."

Policymakers pointed to a softening labor market last month and made their first rate cut of the year, setting the federal funds rate in a range of 4% to 4.25%. Waller expressed support for further easing of the main interest rate, which "moderately restricts aggregate demand and economic activity."

The Conference Board and the Business Council said that this quarter, CEOs see the risk of tariffs harming their industries as lower than in the third quarter. They view geopolitical instability, cyberattacks, new technologies such as artificial intelligence, and legal and regulatory risks as greater threats to their businesses.

The survey shows that compared with the third quarter, CEOs increased their hiring and capital investment plans this quarter. The proportion of CEOs planning to expand their workforce rose from 27% in the third quarter to 32%, while the proportion planning to increase capital expenditures jumped from 15% to 22%.