Insights for What's Ahead

• Assessments on the short-term economic outlook take the strongest hit
  Compared to six months ago, views on current economic conditions and short-term expectations for the economy, as well as their own industry, have worsened, with the decline being the steepest when assessing the short-term outlook of the economy. As the war in Ukraine shows no signs of ceasing, elevated uncertainty due to the geopolitical landscape, record-high inflation, tighter financial conditions, and declining consumer confidence will continue to exert downward pressure on the region’s growth prospects in the near future. In line with CEOs’ pessimistic short-term assessment of the economy, The Conference Board projects the Euro Area likely will enter into a recession in late 2022 and early 2023.
• Views regarding general business outlook for Europe turn pessimistic 
  Aggregate views on CEOs’ company’s sales, employment, and capital investment diverge considerably in this survey period. Overall, CEOs are more optimistic about the short-term prospects of these key indicators outside of Europe than inside. Compared to the first half of 2022, the combined measure outside of Europe remains positive, declining from 61 to 53. However, inside Europe, the measure falls below 50, from 55 to 43, signaling on average more negative than positive views. As the economic consequences of the war in Ukraine continue to unfold and strongly impact regional energy supply and energy prices, its adverse impact is felt more in Europe than elsewhere.
• High energy prices are here to stay, and are seen as the main driver of inflation, and cost.
  While almost half (44 percent) of CEOs and Chairs expect energy prices to return to their 2019 average no earlier than 2024, over one-third (38 percent) do not see this ever happening—consistent with the findings in our H1 2022 survey. When asked to rank the drivers of inflation CEOs believe will impact their company the most in 2023, energy costs are ranked as the most impactful factor, well above the others. Shortages of materials and suppliers and wage growth complete their top three list.
• Soaring energy costs add pressure on existing investments, operations and production lines in Europe
  A third of CEOs and Chairs in our survey (34 percent) say they plan to temporarily either pause or decrease investments in existing businesses owing to high energy prices. Fifteen percent of respondents plan to do this permanently. In another sign of the impact surging energy costs have on companies in Europe, 32 percent of the respondents said they intend to temporarily downsize operations or cease production in the region, while a worrisome 15 percent plan to do this indefinitely.
• Investment in green energy technologies is a top priority.
  CEOs in Europe signal strong and clear intentions to ramp up their investments in green energy technologies. In fact, the share of those planning to increase green investments permanently, and not just temporarily, rises from 48 to 59 percent.
• The role of China remains important for a significant portion (but not all of) European company leaders with respect to their own business.
  Fifty-three and 50 percent of business leaders in Europe see China as a major supplier of raw materials and intermediate goods for their own business, respectively. For a comparable number (44 percent) China’s market is an important source of stable revenues. When it comes to innovation and R&D, China is seen as very important or important for their own business by a third (31 percent).