By Nathalie Voit

CEO confidence declined sharply in the second quarter as most corporate executives anticipate weakened economic conditions ahead.

According to the Conference Board’s Measure of CEO Confidence, CEO sentiment fell to a new post-pandemic low of 42, down from 57 in the first quarter. The board noted that any reading below 50 signifies that CEO sentiment has veered into negative territory.

The survey found that just 14% of executives reported better business conditions in Q2 than six months ago, compared with 34% in Q1. Sixty-one percent said conditions were worse, up from 35% in the previous quarter.

CEOs’ short-term economic prospects also deteriorated, with 60% of executives saying they expect worse conditions ahead, up from 23% in Q1. Only 19% of CEOs think things will improve, down from 50% in the year’s first three months.

A majority of CEOs (57%) project price surges to ease “over the next few years,” but the country to sustain a “very short, mild recession,” which the central bank offsets. Eleven percent of executives foresee a challenging recession due to the Federal Reserve’s tight monetary policy. The board said just 12% of respondents expect inflation to decrease without a recession.

Despite the dim outlook, about two in three executives (63%) expect to expand their workforce. More than 9 in 10 (91%) say they factored in wage increases of 3% or more over the following year, up from 85% in the prior reading.

However, 4 in 5 say they have trouble recruiting qualified workers, while just 38% project increases in their capital budgets in the year ahead, down sharply from 48% in the first quarter. Twenty percent of executives envision a mix of low growth and high inflation (“stagflation”) for the U.S. economy.

The overall pessimistic tone of the survey stems from “rising prices and supply chain challenges, which the war in Ukraine and renewed COVID restrictions in China exacerbated,” Chief Economist of The Conference Board Dana M. Peterson said in a press release.