CEOs Remain Bullish On Business Outlook, But Their Enthusiasm Softened In Fourth Quarter

Business leaders remain generally confident going into 2022, although supply chain issues and labor shortages have dampened their sentiment and outlook from earlier highs. The Measure of CEO Confidence, produced by The Conference Board in collaboration with The Business Council, retreated slightly in the final quarter of 2021. The measure ended the year at 65—a reading above 50 points reflects more positive than negative responses—but down moderately from third quarter’s 67 and a significant slip from second quarter’s 82, an all-time high for the survey.

Breaking down the results further, the survey—conducted November 3-19, before news of the Omicron variant—found that CEOs’ assessment of current economic conditions softened but overall remained positive. In fourth quarter, 61 percent said conditions are better compared to six months ago, down from 70 percent in third quarter. CEOs’ view of conditions in their own industries also weakened, with 58 percent reporting better conditions compared to six months ago, down from 64 percent in third quarter. Looking ahead, expectations declined moderately in fourth quarter compared to third quarter: 61 percent of CEOs expect economic conditions to improve over the next six months, up from 60 percent. Similarly, 61 percent of CEOs anticipate short-term prospects in their own industries to improve, down from 65 percent.

“CEO confidence slipped further in fourth quarter, as business leaders continued to wrestle with the economic aftermath—and ongoing social impacts and scientific uncertainties—of the pandemic,” says Dana Peterson, chief economist of The Conference Board. “Hiring and retention remain defining challenges entering the new year, as CEOs’ concerns over labor shortages and wage growth rose further from the heights already recorded in third quarter.”

The job market tightened in fourth quarter as labor shortages grew more pronounced. Even as the pace of hiring is likely to accelerate over the next 12 months—69 percent of CEOs expect to expand their workforce, up from 60 percent in third quarter—filling these open positions may be a struggle: 79 percent of CEOs are now reporting difficulty finding qualified workers, up from 74 percent in third quarter. The survey found that the outlook for wages rose sharply in fourth quarter as a result, with 79 percent of CEOs expecting to increase wages by three percent or more over the next year, up from 66 percent.

“Facing snarled supply chains and inflation, severe labor shortages in many areas and new viral variants, CEOs are significantly less sanguine than they were earlier this year, when the pandemic seemed all but over,” says Roger W. Ferguson, Jr., vice chairman of The Business Council and trustee of The Conference Board. “Nevertheless, a strong majority remain optimistic about the prospects for growth, both within their own industry and for the economy as a whole. In the year ahead, fortune will continue to favor those companies and leaders able to nimbly navigate these new and resurgent challenges, putting into practice the hard-won lessons in resiliency that were learned over the past two years.”

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