Corporate America Isn’t Feeling Great About the Economy

• Small business owners and CFOs both reported feeling downbeat about the US economy in recent surveys.
• CFOs are far more optimistic about the prospects for their own companies relative to the wider economy. 
• A historically low number of small business owners said it’s a good time to expand operations. 

Corporate America isn’t optimistic about the economy. 

The latest gross domestic product figures showed Thursday that the US economy grew in the third quarter at a 4.9% annualized rate, or more than double the pace of the prior two quarters. Yet with inflation still double the Federal Reserve’s 2% target, recent chaos in the bond market, and other bearish headwinds taking shape, small business owners and chief financial officers across the country say they’re feeling downbeat about the state of things.  

“Whether it is inflation, higher rates, deficits, domestic politics, or geopolitics, there is a sense of dread about the broader economic outlook,” Ned Davis Research strategists wrote in a note Friday. 

Consumer Confidence reports show expectations for what’s ahead have deteriorated for nearly two years, and the latest readings from The Conference Board show the index is hovering more than one standard deviation below its mean. Americans’ expectations for jobs and business conditions remain in negative territory. 

In the business world, the Fed’s CFO survey shows that the group continues to stick to its historical trend of being more optimistic about their own companies than the country. But the disparity between what they see for their firms versus the rest of the economy hit historic levels last year, and is still historically high. 

About two-thirds of respondents are optimistic about their firms’ prospects over the next 12 months.

Small business owners, however, have emerged as a uniquely negative cohort, with only 5% saying it’s a good time to expand business within the next three months, a historically low number, according to NDR.

“Whatever business conditions are now, they expect them to get much worse six months from now,” NDR strategists said. “The outlook for general business conditions was a dreadful -43 in September, after hitting a record -61 in June 2022. Think about that — worse than the oil shock of 1973-74, the double-dip recessions of the early 1980s, the GFC, and the pandemic! Really? Are things that bad?”

The latest Bloomberg poll showed forecasters give a 55% chance for a recession in the next 12 months, and Fed officials remain divided on how policy could change in the months ahead.

Still, the market research group said it’s possible that widespread corporate pessimism actually implies reason to stay upbeat. 

“When everyone is preparing for the worst, you don’t get speculation and overinvestment,” NDR maintained. “Expansions become more durable and ‘experts’ are left scratching their heads.”