Dive Brief:

• CFOs plan to raise pay by 3.3% in 2023 to adjust for inflation even while acknowledging that their compensation increases this year lagged the 7.1% surge in the Consumer Price Index by about 2 percentage points, the Federal Reserve Banks of Richmond and Atlanta found in a quarterly survey.
• CFOs are pessimistic about economic growth next year, projecting just a 0.7% gain in gross domestic project (GDP), the two Fed district banks said Wednesday, describing a survey conducted with Duke University’s Fuqua School of Business. CFOs also expect price pressures to ease somewhat in 2023 but remain high. 
• “Inflation remains the top worry of CFOs, alongside availability and quality of labor, followed by tightening monetary policy,” according to John Graham, survey director and a Fuqua professor.

Dive Insight:

The CFOs’ expectation for economic growth in 2023 “remains well below the historic average” and unchanged since the third quarter, according to the survey by the Fed and Fuqua. Thirty-one percent of CFOs expect a downturn.

Compared with CFOs, Fed officials on average hold a gloomier view of 2023 growth. They see GDP expanding just 0.5% in 2023 compared with their September estimates of 1.2% growth, according to projections released by the central bank on Dec. 14.

Several economists — including those at the Conference Board and Fannie Mae — see the economy shrinking early next year.

“It should come as no surprise that many economists, including me, expect a recession to begin in 2023” that would probably increase employment to about 6% from 3.7% in November, former Treasury Secretary Larry Summers wrote Monday in the Washington Post.

A downturn “could occur as small and medium businesses hit a wall of high-interest refinancing, as markets suddenly focus on what a recession would do to corporate profits, as consumers’ COVID-era savings are depleted or as businesses that have been clinging to their workforces realize they’re no longer necessary,” Summers said. “Alternatively, oil prices could spike or geopolitical risks could increase.”

The economic outlook is murky, Summers said. Fed “Chair Jerome H. Powell was right in his Dec.14 news conference to emphasize that there is no basis for confident economic prediction.”

Confounding forecasting efforts, economic data released Wednesday was mixed.

The National Association of Realtors said existing home sales fell 7.7% last month. Sales have slumped for 10 straight months as the Fed seeks to curb inflation with the most aggressive increase in borrowing costs since the 1980s.

At the same time, consumer confidence rose this month to the highest level since April, the Conference Board said Wednesday. Consumer spending makes up about 70% of GDP.

Also, expectations for inflation fell to the lowest level since September 2021, pushed down in part by falling gas prices, the Conference Board said.

The Fed’s preferred gauge of inflation — the core personal consumption expenditures (PCE) price index excluding volatile food and energy prices — will likely rise 3.5% next year and 2.5% in 2024, according to Fed officials’ median projections released last week. Core PCE increased 5% during the 12 months through October, well above the Fed’s 2% inflation target.

CFOs on average expect 2023 revenue growth at 4.7%, far below their 7.4% average projection during the third quarter survey by the two Fed district banks and Fuqua.

On a bright note, CFO concerns about supply chain disruptions eased during the fourth quarter, according to the survey, which was concluded on Dec. 2.