Are You Optimistic About the Economy? Most CEOs Are

Steve Odland: Welcome to C-Suite Perspectives, a signature series by The Conference Board. I'm Steve Odland from The Conference Board and the host of this podcast series. And in today's conversation, we're going to discuss CEO confidence in the first quarter of the calendar year. 

Joining me today is Dr. Stephanie Guichard, the senior economist at The Conference Board. Stephanie, welcome.  

Stephanie Guichard: Hi, Steve. Nice to be here.  

Steve Odland:Yeah, so, Stephanie, we have some very fresh data. Late last week, The Conference Board released the first-quarter CEO Confidence survey. We've been doing this survey for a very long time. Tell us a little bit about the survey, how many people are engaged in this, and so forth.  

Stephanie Guichard:Yeah, so this survey has been around since 1976, so it's almost 50 years old, and the respondents to this survey are Fortune 500 CEOs associated with the business concern. In other words, these are the CEOs of the largest businesses, not only in the US, but In the world. It'sa very good barometer of the health of the US economy from the perspective of these US CEOs. And each quarter, we have about 130 respondents. This time, we had 134. And because timing is very important, I want to add that the responses were collected from January 27 to February 10. 

Steve Odland:Soit'spost-US election.  

Stephanie Guichard: Obviously. It's our first CEO survey since the US election. The previous one, we collected the answers in October, so this is really the first one where we can grasp how CEOs are reacting to the new policy environment.  

Steve Odland: OK, so that's really going to be interesting. From a top-line perspective, what did they say?  

Stephanie Guichard:So our measure of CEO confidence increased by nine points in the first quarter of 2025, to 60. So this is the highest level in three years. And 50 is kind of the threshold between pessimism and optimism. So for the whole of 2024, the measure was above 50, which means CEOs were optimistic, but it was very close to 50. And this is what we were calling cautious optimism. But right now, with this new measure, we are at 60, it's well over 50, and we can say that CEOs are really optimistic at the beginning of 2025.  

Steve Odland:Yeah, so this is a big jump in the data, and as you say, highest level in three years. That sounds pretty good. So what is it about the environment, the political environment, the economic environment, and so forth, that makes CEOs more confident?  

Stephanie Guichard:So first of all, I think for the whole of 2024, there was the uncertainty around the election, who would win the election. So this uncertainty is gone. They know who's in charge of the country. And I think they're expecting some very business-friendly policies, which is really supporting their optimism.  

Steve Odland:Yeah. And you pointed out earlier that these are CEOs of mostly multinationals, global firms. And this is a year, 2024 was the year, where more than half of the world's population went to the polls. So it really reflects the results of not only the US elections, but also the elections around the world. And this is very interesting that now, looking forward, they feel better about this. So what is it, when you get under the numbers a little bit, what are they thinking the economic conditions will look like over the next six months? 

Stephanie Guichard: Well, can we take a step back? And I would like to point first that they already think that the economic situation has improved in the last six months. And if you remember our previous CEO surveys, we were a bit struggling to understand. Why are they saying that economic conditions are not improving while the US economy was really doing great? So I think this is something that is over now. So they are acknowledging that the economy is still strong both overall and also in their own industry.  

Steve Odland: Obviously, the economy wasn't doing that great. And I think that the greatest fears were inflation and this slowdown in growth, which is what we've heard over time. But now going forward, what are you seeing?  

Stephanie Guichard: So, going forward, CEOs think that economic conditions are going to improve, and in fact, the expectation component of our Measure is the one that has increased the most. They're optimistic about the future, both for the economy in general and also for their own industries. 

Steve Odland:Yeah, and that's important because we've seen data in the past, responses in the past where they think, generally, things should look better, but they're worried about their own industry. And that gets worrisome, but this is a case where they'reactually fairly positive about their own industry. Isn't that a good sign?  

Stephanie Guichard: Yes, it is.  

Steve Odland: One of the things that has been an overriding concern for CEOs over the past few years has been the labor shortages. What are the CEOs saying now about labor? 

Stephanie Guichard: CEOs are much less concerned about labor shortages. I mean, this is a trend we've seen in 2024 and is continuing in 2025. So right now, the majority of CEOs is reporting either very little or no problems hiring.  

And just to give you an idea of how things have changed: In early 2022, two-thirds of CEOs were telling us that they had major problems finding the workers with the skills they needed. Now it's less than 10%. 

Steve Odland: Wow. That's a huge shift. So does that mean that they've hired everybody, all those skills that they were missing before, and everything's fine?  

Stephanie Guichard: Well, it means that they have hired people they needed to hire, but it also means that they have adapted to the new labor situation, and maybe they have replaced some of their workers with technology, or maybe they'rein the process of doing that. I think it can be both.  

Steve Odland:Yeah. So basically, they've adjusted. They've either found the people, or they've adjusted through other means. And sothey're feeling better about it, I guess. 

But that'sgood, because these labor shortages were contributing to inflation through increasing wage rates. So maybe that will help balance out some inflation.  

Stephanie Guichard: Maybe. But when we look at the wage data, CEOs are still planning to increase wages by—for the majority, it's between 3% and 4%. Soit's not excessive, but it's still a decent wage increase, which is good for the economy without really being inflationary.  

Steve Odland: Wow, that sounds like Goldilocks—just right— from a labor standpoint. They've got enough labor. They're still raising wages. And we don't see layoffs in the mix here, do we? Any planned?  

Stephanie Guichard: Well, we see a slight increase in layoffs. I mean, we had 26% of CEOs planning layoffs at the end of last year, now it's27%. It's a very modest increase. And then when you look overall at their plans for the workforce, we still have the majority of CEOs planning to keep their workforce unchanged.So we have 41% planning to keep their workforce unchanged.  

However, and this is what I would like to point out, we see some decline in the share of CEOs planning to expand their workforce. And, of course, as you mentioned, it may be the case that they found all the workers they needed finally, so they don't see the need to expand further. But I think this is where we need to be a bit cautious. It's a bit odd that CEOs are very optimistic about the future, but at the same time, they are not planning to expand. So I would say, let's keep monitoring this to see if, potentially, it's the result of the highest uncertainties that we hear about every day. 

Steve Odland:Yeah, beginning with the inauguration of the new administration, there were a lot of executive orders that came out. The timing of this survey captures a little bit of that, but certainly not the full force, since they continue to come out daily. Did you get any sense—and when the world is shifting around them, there's a lot of uncertainty, and CEOs hate uncertainty. But did you get any sense of that in the data?  

Stephanie Guichard: Not really. And that's really amazing when you look at historical data.So we have measures of uncertainties, and all these measures of uncertainties have jumped in the past month. However, typically, this would be accompanied with a decline in confidence. This is not at all what we see. We see an increase in uncertainty and an increase in confidence. And it's not only our survey. Most business surveys, for small and medium enterprises or the regional ones, they also show this increase in confidence. 

And I think this is really important because it means that, so far, even if there is uncertainty, it hasn't affected CEO confidence because they are hoping for this more business-friendly environment.And this is really what seems to be mattering.  

Steve Odland: Wow, Stephanie, I can't remember another time when you've had high uncertainty and high confidence. They usually work in opposite directions. So this is— we have to point out it's a very unusual time.  

Stephanie Guichard: Exactly.  

Steve Odland:We're talking about the latest CEO confidence numbers. We're going to take a short break and be right back. Welcome back to CEO Perspectives. I'm your host, Steve Odland from The Conference Board. And I'm joined today by Dr. Stephanie Guichard, the senior economist at The Conference Board.  

And Stephanie, we were talking about this whole new era, post-election, and the survey was from 134 CEOs of some of the largest multinationals around the world, a very august group of individuals. But we were talking about the uncertainty that the post-election era provides because of the changes in policy, but also the high confidence and how unusual that is.  

What do you see in the data about actions that either are not happening because of the uncertainty or are happening because of the policy changes? 

Stephanie Guichard: So, as mentioned earlier, what we don't see is some increase in planned expansion of the workforce. Maybe this is where the uncertainty is playing. However, what we do see, and something that goes with the higher confidence, is that CEOs have started to upgrade their capital spending plans. 

Steve, typically when you have higher uncertainties, businesses are thinking, oh no, it's not a good time to invest. But what we are seeing now is they have upgraded slightly their capital spending plans. So this is also something that is potentially very good.  

Steve Odland: So let me make sure I understand. Soyou're saying that even though there's this uncertainty, they still are planning capital investments.  

Stephanie Guichard: Exactly.  

Steve Odland: And again,this is really unusual because typically, when there's uncertainty, that means there's uncertainty about cost, there's uncertainty about return, there's uncertainty about demand. And hence, usually, CEOs pause capital investments during this period of time, and that's not happening here, which means there must be some level of, if not certainty, then confidence, at least—and that's what you're saying—about the environment, confident enough to say, let's go ahead with our capital investment plans. 

Stephanie Guichard: Yes, exactly. So we had an increase in the share of CEOs expecting to increase their capital plans and a decline in the share expecting to downsize their capital plan. So yeah, that's really a reflection of animal spirit, higher confidence.  

Steve Odland: Animal spirits. So did we measure animal spirits in this, too? No, I don't think so. 

Stephanie Guichard: No, we don't.  

Steve Odland:That's an opportunity for the next survey, animal spirit. Very good. One of the things that drives decision-making, or investment, by CEOs and CFOs is the inflationary environment. What's going to be the cost of capital? And hence, what kind of return do you need to hurdle the cost of capital and provide an economic return? 

So what do you think, what do we hear from CEOs about their estimates for inflation and also their estimates about the Fed interest rate actions.  

Unfortunately, Steve, we didn't ask any of these questions this time around.  

Yeah, but I think in the last survey, we saw some predictions of Fed cut cuts, d The Conference Board's own predictions are that there will be further cuts later in the calendar year, but we have to see. Of course, tariffs play in all of this. Did we hear anything about tariffs in this in these data?  

Stephanie Guichard:So we did, and that'svery interesting because we typically run a list of risks through CEOs and we are asking them: so is it a major risk for your business or small risk or medium risk? And we have this list, and tariffs is not part of the list. However, we let them write down any risk that they think is important that we didn't mention. And typically, we go through the list, we don't see any clear pattern. But this time, yes, we saw several mentions of tariffs, to the point that next time, we're going to include the tariff question in our risks questions. 

Steve Odland:Yeah, and it's a risk because you just simply don't know how to plan your supply chain. Soit's a risk on the input cost side, but it's also a risk on the trading side, meaning the demand side and whether, with higher prices that usually flow through from a tariff increase, whether that will cause a drop in demand and enhance their top line or revenue growth.  

So, these are key risks depending on, of course, on the industry and where their individual company trades.  

Stephanie Guichard: Exactly.  

Steve Odland:Yeah. Any other risks that you see in the survey?  

Stephanie Guichard:So we have the usual list of risks, as I mentioned earlier, and what's interesting is the top risks in the mind of CEOs haven't changed. It's cyber risk, regulatory uncertainty, financial and economic risks, are the high impact risk. But what we see compared with last year is a decline in the perceived intensity of these risks. So risks are still important, but a bit less than they were at the end of 2024. The only one that increased in intensity was geopolitical instability.  

Steve Odland: Yeah, and there's a lot of that all over the world, sufficient enough to make anyone cautious, but this cyber risk has been part of every survey we've done for a very long time, and it probably will not get better with the introduction of AI and all of the exposure around the world to all the various actors. I don't know if that will ever go away. But, at some point, you have to just put that into your base case as the CEO and go forward.  

But the geopolitical risk is really upon us here with the Middle East and Ukraine and South China Sea. And soit's everywhere you look, there are these shifting sands. And you're saying you clearly saw all that.  

Yes.  

Any other points that you want to bring out from the survey that we haven't covered? 

Stephanie Guichard: Not really, but I think, when we look at the big picture, this survey is really good news for the economy, but I think we still need to think about both the upside and the downside.So, on the upside, we see that CEOs are really confident. We see that capital spending may be up. 

But on the downside, I mean, we see some more hesitancy on hiring. And also, as you mentioned earlier, it'svery rare that you have the situation with increased uncertainty and increasing confidence. So, the question is, where do we go from there?  

Steve Odland:Yeah. And we could take the survey again in a couple weeks, and it could be different, with as fast as things are changing. So this is really a very interesting time for economists, but also a challenging time for CEOs, as the rules of the game seem to be shifting very quickly here. Dr. Stephanie Guichard, thank you so much for being with us today.  

Stephanie Guichard: Thank you, Steve.  

Steve Odland: And thanks to all of you for listening in to C-Suite Perspectives. I'm Steve Odland, and this series has been brought to you by The Conference Board.