Yelena Shulyatyeva is worried about the U.S. economy. The Conference Board, where she is senior U.S. economist, has just released it second-quarter Measure of CEO Confidence and the picture is not pretty. CEO Confidence in the second quarter has posted its biggest drop since 1976. But she is far from being as worried as the 83% of the chief-executives in the survey who expect a recession in the next 12 to 18 months.
It’s clear from the survey that tariffs and the uncertainty they have create is a factor here, along with geopolitical instability which is actually number one on their list of worries. This is a sharp contrast from the first quarter survey when Donald Trump’s victory led many to be more optimistic that business-friendly, growth driving policies were in store, helping to drive CEO confidence higher.
Yet Yelena notes that actually more than half of the CEO’s not have cut their business investment plans - at least not yet - while a small but significant segment has definitely decided to cut theirs now. And the majority do not expect to cut workers this year.
She is adamant that she and her Conference Board colleagues do not expect a recession this year. CEO’s of many of the firms in their survey do not plan to let workers go. More than half still plan to give employees raises. And the fact that the President has backed off from some of his initial tariff plans may lead to an increase in CEO confidence in the third quarter survey.
I have to ask her about what this means for the Federal Reserve this year. After all she spent two decades on Wall Street analyzing the Fed’s monetary policy path, how the economy and inflation drive it, and what it means for the bond market. Will negative CEO sentiment push the central bank more quickly toward the rate cuts?
”All I hear from the Fed is wait and see. That’s their new buzzword,” she says. “Our view at the Conference Board is that we are not going to see any cuts in the policy rate until the fall, until probably the earliest possible date is September.”
”But I wouldn’t be surprised if we don’t see any policy action until…the very end of the year, quite frankly, which would likely mean they will have to go more agressively to address the other…part of their dual mandate, which is full employment,” Yelen adds. “So now the concern is on price stability, but they will eventually have to address the other one.”
So dive in and hear what she has to say. Are you worried that high and sticky services prices will keep a key part of the major inflation indices from easing further? Find out what Yelena sees now that may help them start falling again.
Conference Board CEO Survey slowdown coming 00:01:28.890
So just to step back a little bit on the survey itself. I think that our major view here is that this is our baseline view that the economy will see a significant slowdown going into the second half of the year, and we're probably not going to get into a recession. I think we are still strong enough to kind of avoid that outcome, but we will see a significant slowdown and uncertainty surrounding trade and tariffs, geopolitical uncertainty. All these things are weighing on economic outlook. The latest CEO confidence survey certainly highlights. How big of a deal this tariffs topic is right. So the survey. The previous survey was conducted back in the beginning of the year before the Liberation Day, and this one comes after that. And what a difference this makes. So previously, we saw business confidence going up quite significantly, just simply on expectations, for probably for some deregulation and other reforms that would come from administration. This particular survey shows you how big of a deal this is, for companies that will see will have to raise their prices and potentially see a significant hit to growth from, you know, in terms of consumer demand.
An ’early’ survey cut-off date 00:03:44.580
The majority of answers were taken before we hit. A pause on the very big portion of tariffs. Right? The reciprocal tariffs so potentially, you know, the answers would change a little bit, and become a little bit less severe with that respect. But I think a significant slowdown. That picture will probably not change.
How big an effect from tariffs? Investment not slowing? 00:04:20.160
You know we do have tariffs in place, it's being challenged in the courts. But some tariffs will stay, and it's quite a significant amount. So companies will have to raise prices. To a certain extent. The question is, by how much and how much will growth slow down? One other interesting aspect of the survey was that capital expenditures, intentions with respect to that interesting question. So still the majority of respondents did not see big changes to the investment plans.
But pockets of investment slowing are in train 00:05:02.620
Yelena Shulyatyeva: Yet a big chunk, la big share of the CEOs did say that they saw a decline in their investment. So, in other words, the survey told us that quite a lot of CEOs were shrinking their investment
Slowdowns likely will impact hiring 00:07:20.390
When you look at Capex intentions that tells you that we will probably see a significant slowdown in business investment this year, and that will probably precede a slowdown that we expect in the consumer sector. Yes, personal consumption is the biggest share of GDP, but business investment is also a significant share. And you know, if companies start shrinking the investment plans and what they do in terms of expanding. they will not need that many people, either, so the big question will become, then will they start layoffs, or will they just continue to, you know? Keep right on their hiring process.
Do not see big layoffs coming 00:09:01.090
I think we we have seen a big structural shift following the covid crisis, when companies just simply. You know, when they laid off a lot of people, they were not able to find experienced labor after the crisis, so that led them to believe that. Well, we're going to probably hold on to the existing Labor force for as long as we can. The question, though, is, you know, at a certain extent, at a certain point, you know, you will have to lay off workers if growth slows down very significantly. We just don't think that we'll get to that point at least this year.
Wages to slow 00:10:08.200
Well, the survey actually told us that CEOs are thinking about <hiring and wages>. So the pace at which companies are planning to raise wages is going to slow down quite significantly. And that's what we see in the hard data to some degree. You know, the latest readings on employment cost index, for example, in the private sector, or even average hourly earnings in certain industries we have seen a slowdown in wage growth. So I think that is also already driving down inflation to some degree in the services sector. So, goods prices will probably rise. But what we have seen so far this year is quite a deceleration in the services sector.
Consumer Confidence has plunged and rebounded 00:11:50.930
And we actually saw that rebound. Because you know the data. The survey period followed that pause on Liberation Day tariffs. So I think that's kind of the key reason. So consumers saw that. Okay, this is not going forward at the very maximum rate. And you know it. That brought some optimism. However, you know that was only a partial rebound, so that followed five months of declines in consumer optimism. That only brings us back to the low levels that we observed last year. So it's still a relatively low reading, and I think that you know developments that followed the cutoff date on that survey, which was, I think, around May 19th . We saw further escalation between the US and Europe with the President threatening to impose 50% tariffs on goods coming from Europe. Another 25% tariff on goods. You know on Apple’s goods.
Tariffs are bad despite seeming to be useful 00:14:56.030
Well, tariffs could help, and they could work to the advantage of certain industries, such as manufacturing, for example, right? But I think, as an economist. I truly believe that tariffs are bad, and they're just means lower growth altogether. So there will be other industries that would suffer from this, and for the most part it will be the Us. Consumer who will have to pay for all of that. So it's not a foreign exporter who's paying that price. It's really the domestic consumer who is paying the price.
Fed policy is likely on a long-hold 00:18:01.490
You know that brings more uncertainty, and we'll have to make the Fed stay in that wait and see mode until the fall. That's what we should expect. Our own view at the Conference Board is that we are not going to see any cuts in the policy rate until the fall. The earliest possible date is September. But I wouldn't be surprised if we don't see any policy action until the very end of the year, quite frankly, which would It likely means they will have to go more aggressively to address the other part of their dual mandate, which is full employment. So now the concern is on price stability, but they will eventually will have to address the other one.
Fed staff projections are sobering 00:18:49.840
So another interesting thing I saw in the FOMC minutes. The latest minutes show that staff projections were all over the place that they themselves said that the probability of a recessionary scenario is probably as high as their baseline scenario.
Inflation report coming – expect a tempered result 00:20:42.180
Based on the data we already have from the CPI and PPI reports, we expect the core PCE reading at +0.1% in the report tomorrow. So still very low, right? So we are still kind of like in that deceleration mode. But there could be some signs of acceleration in particular categories. So tomorrow the report will be very interesting and important in a sense that you really need to parse out and go deeply into the detail which prices increased, which prices decelerated, decreased, and, apart from, you know, tariff related goods in the report, I will be watching, looking at particular services categories.
Inflation expectations are a loose end 00:22:55.080
The Fed is very much concerned about inflation expectations. So we saw a bunch of mentions of inflation expectations in the latest fomc minutes. So I think if you look at consumer surveys, including the Conference Board survey, you absolutely see this as a big concern.
Yelena Shulyatyeva
Senior US Economist
The Conference Board
Yelena Shulyatyeva is a Senior US Economist for The Conference Board Economy, Strategy & Finance Center, where she focuses on analyzing macroeconomic developments in order to better understand the implications for the broader economy and monetary policy. As part of a team of economists, she produces in-depth analysis of macroeconomic data and trends for the community of C-suite executives providing the insights to help companies make effective strategic decisions to accelerate growth.
Yelena brings twenty years of experience as a U.S. economist at BNP Paribas and Bloomberg L.P. where she provided clients with forecasts and analysis of macroeconomic and financial developments. She regularly appears on business television & radio, and is frequently quoted in media.
Yelena is a member of the Board of Directors of Money Marketeers of NYU and the New York Association for Business Economics (NYABE).
Yelena holds a CFA designation as well as Masters Degrees in Finance & Investments and Economics.
Publications by Yelena Shulyatyeva
Articles
Global Forecast Update 15 May, 2025
The Conference Board Economic Forecast for the US Economy 15 May, 2025
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