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CEO Confidence Declined Sharply in Q2

CEO Confidence Declined Sharply in Q2
PR Newswire
NEW YORK, May 18, 2022

Confidence Dropped to Levels Not Seen Since the Start of COVID
NEW YORK, May 18, 2022 /PRNewswire/ — The Conference Board Measure of CEO Confidence™ in collaboration with The…

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CEO Confidence Declined Sharply in Q2

PR Newswire

Confidence Dropped to Levels Not Seen Since the Start of COVID

NEW YORK, May 18, 2022 /PRNewswire/ -- The Conference Board Measure of CEO Confidence™ in collaboration with The Business Council declined for the fourth consecutive quarter in Q2 2022. The measure now stands at 42, down from 57 in Q1. The Measure has fallen into negative territory and is at levels not seen since the onset of the pandemic. (A reading below 50 points reflects more negative than positive responses.) 

The Q2 survey also asked CEOs to share their views on the Federal Reserve's tightening policy. Notably, nearly 60 percent of CEOs expect inflation will come down over the next few years. But they also believe that the interest rate hikes that will tame inflation will cause a recession—albeit, a very brief, mild recession that the Fed offsets.

"CEO confidence weakened further in the second quarter, as executives contended with rising prices and supply chain challenges, which the war in Ukraine and renewed COVID restrictions in China exacerbated," said Dana M. Peterson, Chief Economist of The Conference Board. "Expectations for future conditions were also bleak, with 60 percent of executives anticipating the economy will worsen over the next six months—a marked rise from the 23 percent who held that view last quarter."

"Amid historically low unemployment and record job openings, nearly 70 percent of CEOs are combating a tight labor market by increasing wages across the board," said Roger W. Ferguson, Jr., Vice Chairman of The Business Council and Trustee of The Conference Board. "On top of that, companies are grappling with higher input costs, which 54 percent of CEOs said they are passing along to their customers. This may contribute to cooling in consumer spending heading into the summer."

Q2 2022 Overview:

Current Conditions

CEOs' assessment of general economic conditions declined in Q2 2022:

  • 14% of CEOs reported economic conditions were better compared to six months ago, down from 34% in Q1 2022.
  • 61% said conditions were worse, up from 35%.

CEOs were more pessimistic about conditions in their own industries in Q2 2022:

  • 24% of CEOs reported that conditions in their industries were better compared to six months ago, down from 40%.
  • 37% said conditions in their own industries were worse, up from 22%.

Future Conditions

CEOs' expectations about the short-term economic outlook weakened in Q2:

  • 19% of CEOs said they expected economic conditions to improve over the next six months, down from 50% in Q1.
  • 60% expected conditions to worsen, up from 23%.

CEOs' expectations regarding short-term prospects in their own industries declined in Q2:

  • 28% of CEOs expected conditions in their own industry to improve over the next six months, down from 58%.
  • 34% expected conditions to worsen, up from 13%.

Employment, Recruiting, Wages, and Capital Spending

  • Employment: 63% of CEOs expect to expand their workforce, down from 66% in Q1.
  • Hiring Qualified People: 80% of CEOs report some problems attracting qualified workers, down from 83% in Q1. Notably, 61% report difficulties that cut across the organization, rather than concentrated in a few key areas—down from 66% in Q1.
  • Wages: 91% of CEOs expect to increase wages by 3% or more over the next year, up from 85% in Q1.
  • Capital Spending: 38% of CEOs expect to increase their capital budgets in the year ahead, down from 48% in Q1. 

Inflation:

What is the most likely outcome of the Federal Reserve's tightening policy?

  • Nearly 60% of CEOs expect inflation will come down over the next few years, but the U.S. will have a very short, mild recession which the Fed offsets ("reverse soft landing"), while 11% foresee a challenging recession. Twenty percent said inflation will stay elevated over the next few years, and U.S. growth will slow significantly (stagflation).

The Federal Reserve is starting to tighten monetary policy.
What do you expect to be the most likely outcome for the U.S. economy?






Inflation will come down over the next few years, but the U.S. will have a very short, mild recession which the Fed offsets ("reverse soft landing")

57%



Inflation will stay elevated over the next few years, and U.S. growth will slow significantly (stagflation)

20%



Inflation will come down over the next few years without a recession (soft landing)

12%



Inflation will come down over the next few years, but the U.S. will have a challenging recession (hard landing)

11%


 

How are CEOs Managing Input and Labor Costs?

  • More than half (54%) of CEOs said they were effectively managing rising input costs by passing along costs to customers, while 13% said they had no major issues with input costs.
  • More than two-thirds of CEOs said they are increasing wages across the board in response to labor market conditions and managing rising labor costs through different means.

What action are you primarily taking to effectively manage rising input costs?








Passing costs on to consumers

54%




Absorbing in profit margins

15%




No major issues

13%




Cutting operating, research, and/or general overhead costs

12%




Finding cheaper alternatives and substitutes for raw inputs

5%




Changing suppliers

1%




What action are you primarily taking to effectively manage rising labor costs?






Increasing wages across the board in response to labor market conditions and managing rising labor costs through different means

68%



Granting only selective wage increases, and declining others

14%



Reducing hiring plans, including selective hiring freezes

11%



Selective or broad scale reduction in force

5%



Not confronting rising labor costs

2%










 

Long range plans to strengthen supply chain:

How are CEOs planning to respond over the longer term to avoid future supply chain disruptions? 

  • Almost half of all CEOs said they are diversifying global source countries; but cannot use solely U.S.-Mexico-Canada (USMCA) sources. An additional 35% said they are not experiencing any significant disruptions.

How are you primarily planning to respond over the longer term to avoid future supply chain disruption?






Diversifying global source countries; but we cannot use solely U.S.-Mexico-Canada sources

47%



Not having specific issues

35%



Using substitute products

9%



Using USMCA sources (near-shoring) and avoiding global source countries

7%



Engaging in M&A to create verticals within our company

2%


 

Geopolitical challenges:

What is the biggest challenge CEOs foresee by the end of 2022 and start of 2023, because of the Russian invasion of Ukraine?

  • More than one-third of CEOs said the biggest challenge they face from economic sanctions against Russia are input shortages and supply chain issues.

By the end of 2022 and start of 2023, the biggest challenge facing my company because of the Russian Invasion of Ukraine will be:






Economic sanctions causing further broad input shortages and supply chain issues

36%



No significant challenges expected

25%



Other

16%



Energy access and energy security for our operations

14%



Loss of Russian assets and business opportunities in Russia

9%


 

Over the next 5-10 years, what do you think will be the most likely long-term effect of current great power tensions among Russia, U.S. and China?

  • Close to 60% of CEOs said geopolitical tensions will likely result in the globe dividing into Western/democratic and China/Russian spheres.

Over the next 5-10 years, what do you think will be the most likely long-term effect of current great power tensions among Russia, the U.S., and China?






Global influence or soft-power conflicts, with globe dividing into a Western/democratic sphere and a China/Russia sphere, but without open military conflict

58%



Deglobalization, undoing the last 40 years of global integration and increasing inefficiency for business

25%



Military conflict in several regions (possibly Taiwan, Baltics, and/or others)

12%



Other

3%



Nothing; expect the global economy and geopolitics to return to pre-Ukraine status quo

2%


 

Source:

CEO Confidence Survey, Second Quarter 2022 / The Conference Board


The CEO Confidence survey was fielded from April 25 through May 9.

 

About The Conference Board

The Conference Board is the member-driven think tank that delivers trusted insights for what's ahead. Founded in 1916, we are a non-partisan, not-for-profit entity holding 501 (c) (3) tax-exempt status in the United States. www.conference-board.org

About The Business Council

The Business Council is a forum for the CEOs of the world's largest multinational corporations across all industry sectors. Members gather several times each year to share best practices, network and engage in intellectually provocative, enlightening discussions with peers and thought-leaders in business, government, academia, science, technology and other disciplines. Through the medium of discussion, the Council seeks to foster greater understanding of the major opportunities and challenges facing business, and to create consensus for solutions. The Business Council is a non-partisan, not-for-profit entity holding 501 (c) (6) tax-exempt status. The Business Council does not lobby. Visit The Business Council's website at www.thebusinesscouncil.org 

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SOURCE The Conference Board

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Economics

Expert on Bath & Body Works: ‘an easy double the next three years’

Bath & Body Works Inc (NYSE: BBWI) might have been painful for the shareholders this year, but the road ahead will likely be a rewarding one, says…

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Bath & Body Works Inc (NYSE: BBWI) might have been painful for the shareholders this year, but the road ahead will likely be a rewarding one, says the Senior Vice President and Portfolio Manager at Westwood Group.

BBWI separated from Victoria’s Secret

The retail chain separated from Victoria’s Secret in 2021, which, as per Lauren Hill, clears the way for a 100% increase in the stock price in the coming years. On CNBC’s “Closing Bell: Overtime”, she said:

[Bath & Body Works] has really strong pricing power. They have 85% of their supply chain in the United States and with the Victoria’s Secret brand now gone, I think it’s a wonderful buy; an easy double the next three years.

Last month, the Columbus-headquartered company reported results for its fiscal first quarter that topped Wall Street expectations.

Bath & Body Works is a reopening play

The stock currently trades at a PE multiple of 6.64. Hill is convinced Bath & Body works is a reopening name and will perform so much better as the world continues to pull out of the pandemic. She noted:

Customers have missed buying their scented products in store and as their social occasion calendars fill up, they are getting back out there and buying more gifts, including Bath & Body Works products.

Hill also dubbed BBWI a great pick amidst the ongoing inflationary pressures because of its reasonably priced products. Shares are down more than 50% versus the start of 2022.

The post Expert on Bath & Body Works: ‘an easy double the next three years’ appeared first on Invezz.

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Economics

Majority Of C-Suite Execs Thinking Of Quitting, 40% Overwhelmed At Work: Deloitte Survey

Majority Of C-Suite Execs Thinking Of Quitting, 40% Overwhelmed At Work: Deloitte Survey

Authored by Naveen Anthrapully via The Epoch Times,

A…

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Majority Of C-Suite Execs Thinking Of Quitting, 40% Overwhelmed At Work: Deloitte Survey

Authored by Naveen Anthrapully via The Epoch Times,

A majority of C-suite executives are considering leaving their jobs, according to a Deloitte survey of 2,100 employees and C-level executives from the United States, Canada, the UK, and Australia.

Almost 70 percent of executives admitted that they are seriously thinking of quitting their jobs for a better opportunity that supports their well-being, according to the survey report published on June 22. Over three-quarters of executives said that the COVID-19 pandemic had negatively affected their well-being.

Roughly one in three employees and C-suite executives admitted to constantly struggling with poor mental health and fatigue. While 41 percent of executives “always” or “often” felt stressed, 40 percent were overwhelmed, 36 percent were exhausted, 30 percent felt lonely, and 26 percent were depressed.

“Most employees (83 percent) and executives (74 percent) say they’re facing obstacles when it comes to achieving their well-being goals—and these are largely tied to their job,” the report says. “In fact, the top two hurdles that people cited were a heavy workload or stressful job (30 percent), and not having enough time because of long work hours (27 percent).”

While 70 percent of C-suite execs admitted to considering quitting, this number was at only 57 percent among other employees. The report speculated that a reason for such a wide gap might be the fact that top-level executives are often in a “stronger financial position,” due to which they can afford to seek new career opportunities.

Interestingly, while only 56 percent of employees think their company executives care about their well-being, a much higher 91 percent of C-suite administrators were of the opinion that their employees believe their leaders took care of them. The report called this a “notable gap.”

Resignation Rates

The Deloitte report comes amid a debate about resignation rates in the U.S. workforce. Over 4.4 million Americans quit their jobs in April, with job openings hitting 11.9 million, according to the U.S. Department of Labor. In the period from January 2021 to February 2022, almost 57 million Americans left their jobs.

Though some are terming it the “Great Resignation,” giving it a negative connotation, the implication is not entirely true since most of those who quit jobs did so for other opportunities. In the same 14 months, almost 89 million people were hired. There are almost two jobs open for every unemployed person in the United States, according to MarketWatch.

In an Economic Letter from the Federal Reserve Bank of San Francisco published in April, economics professor Bart Hobijn points out that high waves of resignations were common during rapid economic recoveries in the postwar period prior to 2000.

“The quits waves in manufacturing in 1948, 1951, 1953, 1966, 1969, and 1973 are of the same order of magnitude as the current wave,” he wrote. “All of these waves coincide with periods when payroll employment grew very fast, both in the manufacturing sector and the total nonfarm sector.”

Tyler Durden Sat, 06/25/2022 - 20:30

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Spread & Containment

Optimism Slowly Returns To The Tourism Sector

Optimism Slowly Returns To The Tourism Sector

Coming off the worst year in tourism history, 2021 wasn’t much of an improvement, as travel…

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Optimism Slowly Returns To The Tourism Sector

Coming off the worst year in tourism history, 2021 wasn't much of an improvement, as travel remained subdued in the face of the persistent threat posed by Covid-19.

According to the United Nations World Tourism Organization (UNWTO), export revenues from tourism (including passenger transport receipts) remained more than $1 trillion below pre-pandemic levels in 2021, marking the second trillion-dollar loss for the tourism industry in as many years.

As Statista's Felix Richter details below, while the brief rebound in the summer months of 2020 had fueled hopes of a quick recovery for the tourism sector, those hopes were dashed with each subsequent wave of the pandemic.

And despite a record-breaking global vaccine rollout, travel experts struggled to stay optimistic in 2021, as governments kept many restrictions in place in their effort to curb the spread of new, potentially more dangerous variants of the coronavirus.

Halfway through 2022, optimism has returned to the industry, however, as travel demand is ticking up in many regions.

You will find more infographics at Statista

According to UNWTO's latest Tourism Barometer, industry experts are now considerably more confident than they were at the beginning of the year, with 48 percent of expert panel participants expecting a full recovery of the tourism sector in 2023, up from just 32 percent in January. 44 percent of surveyed industry insiders still think it'll take until 2024 or longer for tourism to return to pre-pandemic levels, another notable improvement from 64 percent in January.

Tyler Durden Sat, 06/25/2022 - 21:00

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