Small and Midsize Business Confidence in the Economy Plummets As Recession Fears Surge

Small and midsize business (SMB) CEO confidence in the economy retreated in Q1 2023, according to the latest CEO Confidence Index from Vistage, erasing the small gains of the last two quarters.

CEO coaching and peer advisory organization Vistage has measured SMB CEOs’ sentiment on a variety of economic and business factors on a quarterly basis since 2003. In Q1 2023, the Vistage CEO Confidence Index fell to 72.6, down from 75.3 in Q4 2022 and 73.4 in Q3 2022. This is well below the post-pandemic.

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“CEOs are increasingly concerned demand and consumer spending will cool amid Federal Reserve interest rate hikes and stubbornly high inflation continuing to raise costs in a still tight labor market,” said Joe Galvin, Vistage’s chief research officer. “All of these factors are driving business leaders’ heightened pessimism about the future. They may be hesitant to make long-term investments or take on new projects. Many investments are being postponed or scaled back with focus instead on cutting costs and improving efficiency in order to weather the uncertain economic climate.”

Survey highlights include:

CEOs increasingly pessimistic about the economy.

  • 9% of SMB CEOs reported that the economy had improved during the past year, and just 9% expect the economy to improve during the year ahead (compared to last year’s 30% and 15%).
  • 53% anticipate the economy to worsen in the next year.
  • 96% are concerned about a potential recession affecting their business, with 49% of those reporting moderate or extreme concern.

Spending on fixed and capital investments expected to decrease.

  • 30% of SMB CEOs plan to increase total investment expenditures in the next 12 months (down from 36% in Q4 2022 and last year’s 45%). In the past 20 years, planned investments were only lower in one quarter during the pandemic shut down and in three quarters during the Great Recession.
  • 54% expect to increase hiring in the year ahead (down from last year’s 65%). 43% have already increased the size of their workforce since the beginning of the year.
  • 30% have already implemented cost-cutting measures, with another 28% planning to reduce costs in the next 6 months.
  • When asked about plans to find cost savings:
    • 54% plan to delay or reduce capital expenses
    • 51% plan to source new vendors and suppliers
    • 50% plan to reduce their workforce or delay hiring
    • 42% plan to sunset unprofitable products or services
    • 13% plan to decrease sales and marketing

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Profit and revenue expectations hold despite recession concerns.

  • 43% of SMB CEOs anticipate higher profits in the year ahead, just below last year’s 44%, and well below the 61% recorded two years ago.
  • 55% expect increased revenues in the year ahead (below last year’s 68%).

See the full results for the Q1 2023 Vistage CEO Confidence Index.

About the Vistage CEO Confidence Index

The Vistage CEO Confidence Index, established in 2003, is a quarterly survey of small to midsize business CEOs, presidents, and business owners about the U.S. economy. The Q1 2023 Vistage CEO Confidence Index includes responses from 1,405 U.S. CEOs, surveyed between March 6 and 13, 2023. Since its establishment in 2003, the Index has proven to be a reliable indicator for changes in GDP and employment, two quarters in advance.

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