CEOs’ assessment of the current business environment also declined in July, to 5.9 from at 12-month high of 6.7 in June.
Still, not all of this is gloomy. At that level, the Index, which measures CEOs’ forecasts for business conditions 12 months out as well as their assessment of the current environment, remains well within “Good” territory. That’s because despite concerns over the impact of further rate hikes, CEOs say demand and pipelines are healthy, and costs and supply chains are normalizing.
“The reason I show better [conditions] in 12 months is each month, we continue to see the supply chain and material volatility improving,” said the CEO of a large construction company, echoing general sentiment.
And while labor remains a challenge—with limited supply of skilled employees and high wages—that, too, appears to be easing, CEOs say.
“While there are some clouds on the horizon, the underlying strength of the U.S. economy continues, driven in large part by a combination of continued growth and a tight labor market,” said Terry Keating, the CEO of Access Capital.
Chris Mangum, founder and CEO of Servato Corp., expects that as inflation continues to ease, “which will hopefully allow the Fed to slow rate increases, the market will adjust to the new reality of historically moderate borrowing costs, and business investment will increase reasonably.”
Overall, nearly half of the CEOs polled in July expect conditions to show improvement by Q3 of 2024. That is a significant jump from the month prior, when less than a third had projected things to improve over the same time period.