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Key Takeaways
- The Vistage CEO Confidence Index for the second quarter showed a decline in small and midsize company leaders’ sentiment about the U.S. economy from the prior quarter.
- CEOs say they are feeling the effects of inflation and higher interest rates, the executive coaching company’s latest confidence index released Wednesday showed.
- Many CEOs said they are investing in artificial intelligence (AI) or are already using it.
CEOs of small and midsize companies are feeling less confident about the economy than they were earlier this year.
The Vistage CEO Confidence Index stood at 83.3 for the second quarter, falling from 85.9 in the first quarter. The decline in confidence is partly a consequence of inflation and elevated interest rates, Vistage said. To tamp down record inflation, the Federal Reserve has hiked rates from near-zero to more than 5% in the past two years.
CEOs Believe Inflation, Rate Hikes Have Negatively Affected Their Companies
The majority of CEOs (64%) surveyed said that elevated interest rates were hitting their businesses. Despite this, 60% still expect increased revenue in the next 12 months.
While inflation has cooled, from more than 9% in the summer of 2022 to 3% now, businesses are still feeling the effects of higher prices, whether it’s from costlier labor or raw materials expenses. Fifty-nine percent of respondents said the biggest source of inflation affecting their business was labor, 12% believed it was raw materials, 9% thought it was equipment, and 8% chalked it up to higher services costs.
Although the CEOs said labor costs were up, many didn’t anticipate shrinking their company’s workforce. Only 10% thought that the total number of employees at their firm would decline in the next 12 months.
Many CEOs Say They Are Boosting Investment in AI Capabilities
When looking to the future, respondents were optimistic about AI and its potential to increase employee productivity—nearly one-third of the CEOs in the Vistage survey said they were increasing their spending on AI. However, the majority of respondents (55%) said they were making no changes to their AI budget.
For some CEOs, AI isn’t just a tool for the future. Some already are using it at their companies: 49% say they use it for sales and marketing, 33% for improved operations efficiency, and 23% for customer service.
Vistage is an executive coaching company for small and midsized businesses that has measured the confidence of smaller-companies’ top executives about the U.S. economy since 2003 with its quarterly CEO confidence index.