Americans are feeling significantly worse about the economy compared to a month ago, with consumer sentiment dropping across all age and income groups. However, CEOs are displaying optimism not seen in years. Two recent surveys highlight a growing divide between business leaders and the general public regarding economic perceptions. Consumers are uneasy, partly due to fears that new tariffs could exacerbate inflation. Meanwhile, executives are encouraged by the prospect of fewer regulations and are planning to increase investments. “Businesses and consumers focus on very different aspects, and that’s what we’re observing,” said Stephanie Guichard, senior economist at Conference Board. “Businesses are concerned with deregulation and possible tax cuts, whereas for consumers, prices are the main concern.”
Consumer sentiment had been improving since June, driven by hopes that inflation was easing, according to a key indicator from the University of Michigan. However, it has declined for two consecutive months this year. Not only are Americans more pessimistic about the current economic situation, but they also anticipate further deterioration. The long-term economic outlook is at its lowest in over a year, with expectations of a 4.3 percent price increase in the next year—up a full percentage point from January. This is more than double the Federal Reserve’s 2 percent inflation target and higher than January’s 3 percent reading.
“Trump 2.0 fiscal policies so far seem to be an unmitigated disaster for consumer confidence, with expectations of Washington-driven inflation surging,” wrote Christopher Rupkey, chief economist at Fwdbonds, in a note to clients on Friday. “Public fears have escalated dramatically in just the last two weeks.”
Despite this, the pessimism hasn’t reached corporate boardrooms. The Trump administration’s promises of corporate tax cuts and extensive deregulation have garnered support among business owners. CEOs are “substantially more optimistic” about the economy than they were a few months ago, according to a Conference Board survey of 134 chief executives from Fortune 500 companies.
“This is a unique scenario: rising CEO confidence amid increasing uncertainty,” Guichard noted. “For CEOs, one of the major uncertainties of 2024—the election—is resolved, and they expect the new administration to be highly business-friendly. That’s driving much of this confidence.”
The survey found that CEOs were generally less concerned about cyber threats, financial and economic risks, and supply chain disruptions compared to last year. However, a growing proportion—55 percent, up from 52 percent the previous quarter—considered geopolitical instability a “high-impact risk” for their industries.
— news from The Washington Post