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As Uncertainty Fades, Leaders Grow More Confident—And Prepared to Invest

Jan. 3, 2024
Recent surveys from the ISM, Duke University and others show corporate attitudes getting closer to the “normal” we knew before COVID arrived.

To many investors and observers, the Dec. 13 signal from the Federal Reserve’s interest-rate setting Federal Open Market Committee that it might cut three times this year was a reason to move to a more optimistic stance about continued growth in the U.S. economy.

It looks like many corporate executives were already there.

A handful of recently published surveys, reports and forecasts have shown that leaders in manufacturing and beyond are pretty upbeat about what lies ahead in 2024. The "vibecession" that writer and financial educator Kyla Scanlon coined to sum up persistent negativity in the face of improving economic data looks to be leaving C-suites. Here’s a rundown:

  • Nearly 60% of respondents to the Institute for Supply Management’s semiannual economic forecast survey—which was conducted in November—expect to grow revenues this year. Leaders in 15 of the 18 industries the ISM tracks expect revenue growth and the average increase is forecast to be 5.6%—a big bump from the 0.9% booked in 2023.
  • The purchasing and supply executives responding to the ISM are putting money behind those growth expectations: They predict that their capital expenditures will grow an average of 11.9% this year.
  • The CFO Survey conducted by Duke University and the Federal Reserve Banks of Richmond and Atlanta in the second half of November found that executives’ confidence in a solid economy ahead has risen. The more than 400 leaders who took part in the study also are, as they have been consistently since mid-2022, far more upbeat about the prospects for their own companies than about the economy as a whole.
  • As with the ISM survey respondents, those CFOs are preparing to invest in growth: The median expected employment growth among them is 2.7%, a bump from 2.2% in 2023. “For many firms, expectations for key indicators have returned closer to ‘normal’ levels that prevailed prior to the COVID-19 pandemic,” the survey’s authors noted, adding that it’s not clear how much longer it might take to actually reach those pre-pandemic levels.
  • A wide-ranging survey of perceived business risks by consulting firm Protiviti and the Poole College of Management at North Carolina State University found that North American leaders’ assessment of the overall “magnitude and severity of risks” to their plans has nearly returned to its level of two years ago.
  • Of the top 10 risks identified by the more than 1,100 executives Protiviti and NCSU polled globally, seven are today seen as lessening in severity versus late 2022. On top of that, it’s worth noting that the three risks seen as more acute now—cybersecurity, third-party risks and regulatory changes/scrutiny—aren’t directly related to macroeconomic factors such as demand or inflation.

That lower level of uncertainty and the higher levels of confidence it is producing is something that writer Joey Politano at Apricitas Economics discussed last week. The Fed’s commentary about possible 2024 interest-rate cuts, Politano wrote, is “perhaps the most important source of growing confidence” even if many consumers are still quite careful about big spending commitments. But, citing Atlanta Fed data, Politano also noted that companies’ outlooks are generally moving back toward a “normal” level.

“American businesses’ economic uncertainty has also dropped to the lowest levels since early 2020,” he wrote. “Firms have more confidence in their year-ahead employment and revenue forecasts than at the start of either 2021 or 2022.”

By no means do these data points suggest an attitude among business leaders that it’s green lights all the way for 2024. It appears to be more an affirmation that things are generally in solid shape and that important macro factors are, as suggested by our most recent Tales From the Transcript analysis of publicly traded manufacturers, finding a level of balance many businesses have been yearning for since 2019.

The first confirmation test of this more confident/realistic/optimistic outlook will come soon enough: Fourth-quarter earnings season starts in earnest in less than 15 days.

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