Recession, Inflation Keep CEOs Up at Night—But Not This

Vicki M. Young
·5 min read

Recession is the biggest global CEO fear, while elevated inflation remains high on their worry list. However, enthusiasm for investments in renewable energy ranks just 20th out of 23 choices.

That doesn’t mean CEOs don’t see the benefits of clean energy. They do, but they just aren’t making renewable energy investment a priority. Only 32 percent of American CEOs said the transition to renewable energy will be significantly positive for their organizations, versus 51 percent of global CEOs.

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As for the growing use of artificial intelligence (AI), the survey found that CEOs see a big return on investment in AI. They’re strongly embracing AI because they fear falling behind more than the technology’s dangers.

Ninety-two percent of U.S. CEOs believe AI will increased productivity, with 86 percent expect it to imporve marketing capabilities and 63 percent anticipate a boost to sales, revenue and profits. Among global CEOs, 91 percent worldwide believe AI will increase productivity, 79 percent expect it to improve marketing capabilities and 68 percent anticipate a boost to sales, revenue and profits.

But for now, CEOs aren’t that concerned about regulatory burdens. Just 45 percent of U.S. CEOs—and only 37 percent of CEOs worldwide—think AI will increase their regulatory burden, even as the U.S., E.U. and others target AI risks.

CEOs have good reason to prioritize the economy as a key focus. Most CEOs say their companies aren’t prepared to navigate either a recession or an inflation crisis. Worldwide, 27 percent said they are prepared for a recession, while 27 percent said the same for inflation. U.S. CEOs were just a tad more optimistic, with 37 percent saying they are prepared to deal with a recession, and 34 percent saying the same for high inflation.

Those are the key highlights from a C-Suite Outlook 2024 study from The Conference Board. The survey reflects the view of more than 1,200 executives, including 630 CEOs. Respondents were primarily from the U.S., Latin America, Japan and Europe.

Global CEOs said their top tactic for short-term profit growth is the introduction of new products or services, followed by increasing sales via marketing, entering new markets and investments in technologies. For long-term growth over the next three to five years, the top priorities are investing in innovation, have new lines of business, digital transformation (including AI), marketing and promotions, and up-skilling and retention of existing talent.

U.S. CEOs had similar priorities. For short-term profit growth, American CEOs cited introduction of new products or services, investing in technology, increasing sales via marketing and entering new markets. Over the long haul, U.S. CEOs cited not only the same top-five priorities as their global counterparts, but also in the same order.

Inflation concerns also gave rise to increased anxieties over higher borrowing costs. Global CEOs rank higher borrowing costs as their fourth top external concern for 2024, up from 10th place in 2023 and 22nd in 2022. Among American CEOs, higher borrowing costs was the sixth ranked external concern, slipping slightly from fourth in 2023.

But American CEOs had another huge concern when it comes to finances. They ranked the national debt and deficits as the No. 1 geopolitical threat to their operations in 2024. Beyond national debt and deficits, U.S. CEOs cited cyberattacks as their second greatest geopolitical concern, followed by war in the Middle East, higher energy prices and war in Ukraine.

For global CEOs, debt is also a concern, but less so. In sixth place on the list of geopolitical threats is the U.S. national debt, tied with the impact of national debt and deficits in the countries they operate. Their top concern is higher energy prices, followed by the potential for an increase in cyberattacks, war in the Middle East and war in Ukraine.

American CEOs in particular have good reason to worry about the economy. S&P Global Ratings on Tuesday said the number of global corporate defaults rose 80 percent in 2023, and the expectation is that more credit deterioration is likely in 2024 due to slowing economic growth and high financing costs. The U.S. alone saw corporate defaults more than double in 2023, with the increase due to the high number of leveraged loan and debt issues rated ‘CCC+’ or below. S&P’s Nicole Serino said these firms have been seeing “negative cash flows coupled with elevated leverage, high interest expenses and weak liquidity.”

Epiq AACER, a global services firm that tracks U.S. bankruptcy filing information, said earlier this month that Chapter 11 bankruptcies in 2023 jumped 23 percent, due to higher interest rates, bloated debts and supply chains rocked by geopolitical tensions. Last year’s commercial Chapter 11 filing increased to 6,569 from 3,819 in 2022.

And for those firms on the hunt for cash flow, many might not see much improvement in 2024. During a webinar from credit ratings firm Fitch Ratings last week, Emily Spain, associate director for corporates, said while consumers still remain relatively healthy, “We are seeing some signs of softening.” She attributed that to headwinds such as decreased savings, rising debt levels, and the cumulative impact of high inflation.

She said those consumer headwinds could mean that sales volume for the retail sector could be down in 2024. She also cited a continuation of a trend seen over the last two years or so where consumers have reallocated “expenditures away from goods and back towards services and travel.”

The Conference Board survey found that American and global CEOs are aligned in the battle over returning to the office. The study found that CEOs have basically given up getting workers back into the office full time. Just 4 percent of both global and U.S. CEOs plan to prioritize a full-time return to the office. But consistent with past surveys, attracting and retaining talent remains the No. 1 internal focus for CEOs globally.