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CEO optimism continues to drop, falling further from 2021’s record highs

After 9 months of economic uncertainty, CEO optimism continues to fall.

The latest quarterly survey of America's top business leaders from the Business Roundtable released Wednesday finds pessimism growing among America’s C-suite as businesses mull what could be coming in the next six months for the U.S. economy.

“Global economic uncertainty continues to temper CEO sentiment for domestic plans and expectations,” General Motors (GM) CEO Mary Barra, the Business Roundtable Chair, said in a statement, adding “We must remain steadfast in putting in place the building blocks for future economic growth.”

Then during a roundtable with reporters, Business Roundtable CEO Joshua Bolten said, "All of our CEOs are preparing for a situation in which the economy does experience a sharper downturn," adding, "It's really just a question of how deep this goes."

The declines in sentiment were evident across the board. The results show that over the last quarter, plans for hiring have decreased by 11 points, plans for capital investment have decreased by 11 points, and expectations for sales have decreased by 12 points.

Mary Barra, Chair and CEO of the General Motors Company (GM), speaks during the Milken Institute Global Conference in Beverly Hills, California, on May 2, 2022. (Photo by Patrick T. FALLON / AFP) (Photo by PATRICK T. FALLON/AFP via Getty Images)
Mary Barra, Chair and CEO of the General Motors Company, in May. (PATRICK T. FALLON/AFP via Getty Images) (PATRICK T. FALLON via Getty Images)

Factors such as high inflation, potential Fed interest rates hikes, the war in Ukraine, and a possible energy crisis in Europe were noted as the factors that are bringing down CEO sentiment. And the survey was conducted before events this week — from a possible freight rail strike to worse-than-expected inflation data — further dampened the economic mood.

The group surveys its CEO members each quarter to measure how businesses are planning for the immediate road ahead, both in terms of expectations for sales as well as plans for capital spending and employment. This edition of the survey, conducted between August 12 and September 7, featured input from 170 CEOs.

New lows for 2022

It was only nine months ago that the economic outlook from the nation’s CEOs reached an all-time high, but has since faced a stomach churning decline in early 2022 as inflation and other factors have dragged down markets and optimism down.

The survey included a 19-point drop in the second quarter, which marked the sixth-largest quarterly decline since the index began back in 2002.

Wednesday’s rating of 84 was a 12-point drop to move further away from its recent peak of 124. The index has managed to stay well above a recent low of 34, recorded soon after the coronavirus pandemic swept the globe in early 2020. This week’s rating is on par with the survey's long-run average and above what the group considers the “expansion or contraction threshold of 50.”

‘I do see signs that we could be headed into a recession’

CEO members of the Business Roundtable have recently appeared on Yahoo Finance and expressed plenty of concerns about choppy waters ahead.

AT&T (T) CEO John Stankey, for example, recently sat down with Yahoo Finance and said it was hard to predict whether a recession is around the corner. “Even if we miss a full-on recession, the question is, is the growth strong enough to really supplant the high levels of inflation?” he asked, adding “I think we're going to have to wade into the fourth quarter, first quarter of next year, to really see what the outcome of that game is.”

Another roundtable member, Northrop Grumman (NOC) Chair and CEO Kathy Warden said in a recent episode of Influencers that she didn’t think the U.S. is in a recession now, but that economic conditions were impacting her defense and technology company. “I do see signs that we could be headed into a recession,” she said, adding that a contraction might actually help drive a better balance of supply and demand.

Another member, representing yet another sector of the economy, sees things being a bit more steady. Tractor Supply Company (TSCO) CEO Hal Lawton said, “We expect to have a very good fourth quarter and we think consumer spending and behavior will basically remain about as it is now.”

HP (HPQ) is another member and they recently missed on their quarterly earnings report. CEO Enrique Lores told Yahoo Finance Live that “we were expecting a slowdown in consumer, but clearly the slowdown was bigger than we were expecting” adding that for the months ahead they expect sales to be “lower than what we were expecting a quarter ago but is still significantly larger than what it was before the pandemic.”

A focus on the ‘nation’s current permitting process’

The DC-based Business Roundtable is composed of CEOs from hundreds of the nation's largest companies with a focus on “sound public policy.” With Wednesday's release, the group also weighed in on its policy priorities for the remainder of the year.

Atop the priority list is permitting reforms to help spur U.S. energy production and concerns that the current tax code is penalizing R&D investments.

Duke Energy (DUK) President and CEO Lynn Good, the Roundtable’s Smart Regulation Committee Chair says that the current permitting process hinders companies ability to invest.

Congress is aiming to hold a vote on the contentious issue by the end of this month. Sen. Joe Manchin (D-WV) secured the promise of a vote as part of the deal for his all-important support for the Inflation Reduction Act, but many people are skeptical he can get it passed with some Republicans and Democrats already announcing their opposition.

Good, nodding toward the ongoing negotiations and the unsettled nature of the final bill, said Wednesday that, "We are anxious to work in a bipartisan way as these various proposals come to the fore," adding that both the Business Roundtable and individual companies were directly involved in the conversations with lawmakers.

U.S. Senator Joe Manchin (D-WV) attends an event to celebrate the enactment of the
Sen. Joe Manchin (D-WV) attends an event at the White House to celebrate the enactment of the "Inflation Reduction Act of 2022" on September 13 (REUTERS/Kevin Lamarque) (Kevin Lamarque / reuters)

The roundtable also warned this week that a possible nationwide freight rail shutdown would be an "economic catastrophe."

On Wednesday morning, Labor Secretary Marty Walsh welcomed both the rail companies and unions to a meeting at the Department of Labor in Washington as administration officials frantically worked to head off a shutdown. On Wednesday afternoon, a spokesperson for the department said talks would continue as the "parties are negotiating in good faith and have committed to staying at the table today.”

Bolten says this is another issue where the roundtable is in touch directly with the negotiators and the White House to "make sure they appreciate the depth of the disaster that will be imposed on the economy" if the talks fail.

This story has been updated.

Ben Werschkul is a Washington correspondent for Yahoo Finance.

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