3 US economy concerns keeping CEOs up at night
It’s not an easy time to be the CEO of a small or midsize business. According to new data from Vistage, issues like tax reform, tariffs and talent are still keeping CEOs awake at night, while concerns about the trajectory of the U.S. economy continue to loom large.
When we polled CEOs from small and midsize businesses as part of the Q4 2018 CEO Confidence Index survey, the majority (76%) of the 1,257 respondents said that they don’t expect the economy to improve this year. Another 33% said they expect the economy to get worse — 23 points higher than last year.
At the same time, CEOs expressed confidence in the performance of their own firms for the year ahead. Nearly three-quarters (70%) said they expect their revenue to increase during the next 12 months, while 61% expect higher profits.
The reasons for these mixed messages?
1. Confidence in the U.S. economy is bottoming out.
Despite historically low interest rates, abundant access to financing, and record reductions in energy costs, many CEOs are worried about the mid- to long-term outlook for the U.S. economy. The Vistage CEO Confidence Index — recognized by economists as a strong predictor of GDP two quarters in advance — dropped to 95.4 in Q4 2018 from the 110.3 recorded one year ago. While the current index is still significantly higher than the 48.7 recorded during the Great Recession of 2008, it indicates we’ll see a decline in the growth cycle as GDP slows through 2019 and into 2020.
2. CEOs continue to tangle with tax cuts, tariffs and talent.
While the rest of the world holds its breath for the Trump administration’s next act, U.S.-based businesses are still tangling with two of its most debated initiatives. The Tax Cuts and Jobs Act hasn’t sweetened the pot like it was supposed to, as 56% of CEOs surveyed said it had no impact on their hiring, business investment, or sales. Tariffs have also been bad news for 43% of CEOs, hitting those in wholesale trade, manufacturing, and construction especially hard. CEOs are also feeling pressure to hold on to their top talent, as the pool of eligible workers continues to shrink.
3. A global recession is looming.
After 10 years of GDP growth, a soft landing seems inevitable. The impact of fiscal stimulus will wear off at exactly the same time the true cost of tariffs begins to bite. Coupled with underlying weaknesses, including an aging workforce and sluggish productivity, it’s no surprise that more than half of economists surveyed by the National Association for Business Economics predict a recession by early 2020.
CEOs should double down on 3 fundamentals
With a downturn in the U.S. economy cards, CEOs from small and midsize businesses have to balance their instincts with the perspectives of respected peers and trusted experts. Following these three tried-and-true strategies from our CEO Projections for 2019 report will take the gamble out of the 12 months to come:
1. Invest wisely. Follow the lead of the 15% of CEOs who spent their 2018 tax savings on areas that matter most for the short to midterm. Buy equipment with a shorter shelf life if it’s more cost-effective, and postpone major capital or real estate investments until prospects improve.
2. Focus on existing talent. People are your most valuable resource, so concentrate on developing and engaging your best and brightest employees. Create a culture that encourages people to stick with you, even when the chips are down.
3. Talk to your customers. Existing customers are the foundation for growth in a declining business cycle. If you’re facing tough decisions, they are too. Maintain an open dialogue and focus on where you can add value, rather than on price, to keep them engaged.
This article first appeared on Inc.com