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Russia’s invasion of Ukraine has not only caused a major
security and humanitarian crisis, but also resulted in a rapidly worsening
outlook for the global economy. Historically high energy prices, renewed
supply chain disruptions, heightened geopolitical risks, and eroding
consumer confidence, on top of a new set of lockdowns in China, are all
putting downward pressure on growth prospects. As a result, The Conference
Board has downgraded its Global GDP growth forecast to 2.9 percent for 2022
and 2.4 percent for 2023. Growth in 2022 was expected to be almost 4
percent before the start of the war in Ukraine.
Against this backdrop, business confidence declined. The
Conference Board Measure of CEO Confidence™ declined sharply in both the US
and Europe. In the US, it fell to 42, down from 57 in Q1 2022. Confidence
levels in Europe dropped from 63 in Q4 2021 to 37 in Q2 of this year.
Confidence levels were lowest among CEOs of multinational companies in
China, at 34, where the measure was taken for the first time. A reading
below 50 points reflects more negative than positive responses.
However,
despite the deteriorating economic outlook and high uncertainty, CEOs in
Europe and in the US remain upbeat about employment prospects. In the US,
the picture is rosiest, with 63 percent of CEOs still expecting to expand
their workforce. In Europe, surprisingly, hiring intentions did not decline
compared to six months ago. In China, negative views about the workforce
outweigh positive ones.
The employment
picture is mirrored in investment. In the US and in Europe many CEOs expect
to increase their capital investments in the short run. There are several
possible explanations for this action:
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Eight weeks into the war, some CEOs may not have yet
rewritten their investment plans.
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Others may see increasing energy prices as an occasion to
accelerate investment to reduce dependency on Russia’s fossil fuels.
·
Some may view the heightened geopolitical tensions as an
opportunity to accelerate the localization of supply chains.
In Europe, the
Measure is conducted in collaboration with the European Round Table for
Industry (ERT). In China, the Measure is based on responses from China CEOs
of US and European multinational companies operating in China. In the US,
The Measure is conducted in collaboration with The Business Council.
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