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CEO Confidence Drops To Decade Low In July Amid Growing Fears Of Recession

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Far more CEOs are forecasting a recession in the near term versus even a month ago, but some say slowing demand amid rising rates and prices is what’s needed to get the economy back on track.

When it comes to the chances of the U.S. economy soon falling into recession, the growing consensus among the nation’s CEOs is yes. And that’s taking a big toll on their outlook for the year to come.

Chief Executive’s July reading of CEO Confidence Index shows the leading indicator at 5.1 out of 10, down 8 percent since June alone—and down 26 percent from where it began the year. CEO optimism for the U.S. business environment 12 months from now is now at its lowest level of the decade, teetering on the edge of “Weak” according to our 10-point scale where 10 is Excellent and 1 is Poor.

The majority of the 177 business chiefs polled July 5-6 now forecast business conditions will worsen over the next 12 months—up 4 percentage points since June—and 41 percent list inflation—and the current administration’s ability to contain it—as their primary concern for the months ahead.

Confidence in current business conditions also dropped in July, down 8 percent to 5.9 on the Index’s 10-point scale. That is 12 percent lower than where it started the year and back in line with levels observed in the fall of 2020, before pre-Covid vaccines and amid the federal election upheaval.

“The economy is beginning to pay the toll of the unprecedented stimulus during the pandemic combined with dramatic shifts in global supply chains while also contending with the inflationary impacts of a very active tariff landscape,” said Tim Zimmerman, CEO of HVAC sheet metal products manufacturer Mitchell Metal Products.

Zimmerman says he is already seeing the impact of higher interest rates hitting the company’s order backlog: “It dropped 61% from the start of June to the start of July. Excluding the bottoming out of demand related to the Covid pandemic, this drop is the most significant since the 2008/2009 Great Recession impact. The markets appear to be more hypersensitive to any change as compared to 10 to 15 years ago. Therefore, I do not expect as large an economic slowdown as in 2008/2009, however, the month-over-month change is dramatic.”

The president and CEO of a publicly traded insurer says he, too, has observed demand pulling back: “Downturn in real estate, can’t fill open positions, inflation has driven up costs, so people are cutting back,” he said. “We are in for a rough time ahead, I think. Contracted spending due to inflation and a lack of confidence will occur.”

“Too cheap of money causes poor capital-based decisions. But the path between raising rates and lowering inflation looks rough,” said Steven Leafgreen, CEO of Western Vista FCU.

“The combination of high inflation and rising interest rates are certain to slow demand. This is happening concurrent to improving supply chain performance,” said Michael Wilson, president and CEO of Vibrantz Technologies, who says he is already seeing an inflection in raw material prices due to weakening demand and improving supply chains. “The combination will ultimately result in excess supply and a period of falling prices. The ability to maintain pricing and hold margins through the downturn will be critical to performance for most companies.”

Wilson says inflation is likely to subside without further action from the Fed, although “further increases in interest rates are going to risk a more precipitous drop in demand and raise the probability of a recession.”

Recession Fears Grow

Our July data shows 44 percent of CEOs now expect a recession in the U.S. over the next 3 to 6 months. That proportion is up from 23 percent just one month prior, when we asked CEOs the same question the first week of June.

CEOs say the amalgam of unabated inflation, rising interest rates, inadequate federal response, the ongoing war in Ukraine and the threat of a looming recession are fueling concerns over what the trough will be.

“Recession in upon us. No indication of government’s ability to countertrends,” said Thomas Doorley, CEO, chair and founder of business consultancy Sage Partners, LLC.

“I don’t need government to solve my problems, but it would be great if they would just get out of the way and stop creating new problems,” said Frank Lunn, president of cloud-based bookkeeping and accounting services firm Kahuna Accounting.

“I don’t believe capital spending can maintain this high level, as interest rates high and economy slows. Too much fear out there right now about what lies ahead, and it will be a self-fulfilled prophecy when it comes to a slowdown,” said Jim Nelson, president of manufacturer Parr Instrument Company

“I believe recessionary pressures will continue through quarters 4 and 1 of next year, but I also feel we need to go through this period. Supply chain concerns are very real but will lessen. This isn’t or shouldn’t be unexpected. We have to manage our businesses carefully,” said Mark Rubenstein, CEO of A Head for Profits LLC, a restaurant supply store in Nashville, Tennessee.

Despite it all, some CEOs remain optimistic for a soft landing—though fewer do each month. Only 14 percent in July forecasted improving conditions for the year ahead, down from 19 percent in June and from 38 percent at the beginning of the year.

“I feel like we will see a slight improvement 12 months from now on inflation, labor shortage, supply chain issues,” said the CEO of a large family-owned construction company.

The chair of a Virginia-based industrial manufacturing company said he, too, is remaining positive, thanks to “current order backlog and the ability to raise our price to cover our increase cost.”

“As CEOs, we need to help support getting America back on track,” said the CEO of a pharma company. “America needs to return the meritocracy that supports ‘with the rising tide, all boats rise’ and stop the divisive rhetoric that is dividing us and polarizing America. As corporate leaders and the stewards of the wonderful economy we all inherited and built by our predecessors, we need to stop being quiet and more vocal about our past and our future.”

The Year Ahead

Fifty-seven percent of CEOs polled in July say they expect revenues to be up by the summer of 2023, down from 63 percent in June. That is the lowest proportion since Covid emerged in the spring of 2020.

“High inflation combined with a pullback in customer spending at a time where we continue to see supply chain disruptions and higher inbound costs are a bleak recipe for sales and margin growth,” said the CEO of a PE-backed consumer manufacturing company.

Yet, half of CEOs (49 percent) say they expect profits to increase within the next 12 months—up from 46 percent in June. That is the first uptick recorded by the Index since the start of the year and may be due to the fact that 76 percent say they have increased or plan to increase prices to cope with current economic conditions.

The proportion of those who plan to increase capital expenditures in the months to come also rose, from 37 percent in June to 40 percent in July—as did the proportion of CEOs who are adding to their headcount, from 42 percent to 46 percent. Despite the up move, those two measures remain off their 2021 averages of 56 and 64 percent, respectively.

Sector & Size View

Looking at economic forecasts by sector, the vast majority show declining optimism in business conditions 12 months from now, with the largest month-over-month drops found among Professional Services CEOs (down 31 percent since June). CEOs in that sector list diffident stock markets, general supply chain issues, fiscal policy and government regulations and practices as the main sources of uncertainty making medium-term planning difficult.

Travel & Leisure CEOs also reported a decline in confidence, down 15 percent from prior month. CEOs in that sector say after an uptick in demand, they are now struggling with labor shortages, rising fuel costs and inflation affecting customers’ discretionary buying power.

At the other end of the spectrum, two sectors are showing increasing confidence since June: Transportation (up 4 percent) and Pharma/Medical Devices (up 17 percent).

“We have continuing strong demand for all of our product lines with several projects in the works for future demand,” said Scott Glaze, CEO of Fort Wayne Metals, a manufacturer of precision wire and component assemblies for medical devices.

Others in the industry say new technologies are helping mitigate the downside of the current environment.

Looking at forecasts by company size (annual revenues), companies across all size ranges reported decreasing optimism in July, vs. June. The largest declines were found among the smallest and largest groups, -12 percent for companies with less than $10 million in annual revenues and -13 percent for those with $1 billion +.

Among the largest companies, CEOs say their backlogs remain strong, for the time being, but rising interest rates are affecting their outlook. For smaller company CEOs, higher costs all around are limiting their ability to grow.

All sectors and sizes are down by double digits (20 percent +) year over year.

About the CEO Confidence Index

The CEO Confidence Index is America’s largest monthly survey of chief executives. Each month, Chief Executive surveys CEOs across America, at organizations of all types and sizes, to compile our CEO Confidence Index data. The Index tracks confidence in current and future business environments, based on CEOs’ observations of various economic and business components. For additional information about the Index and prior months data, visit


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