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CEOs Are Good at Predicting Economic Trends. Their Confidence in Growth Just Dropped Dramatically

CEOs, it turns out, are pretty good at predicting the future—at least when it comes to economic trends.

Ahead of the World Economic Forum in Davos, Switzerland, PwC on Monday revealed that the attitudes of chief executives are “quite accurate” in anticipating the ups and downs of the economy, an assessment that’s based on 10 years of PwC’s CEO survey data. What’s the most telling indicator of how the global economy will fare? CEOs’ confidence in their own organizations’ revenue growth prospects

With that in mind, it’s especially noteworthy that that metric is down this year, with 35% of CEOs saying they’re “very confident” in their company’s future growth over the next 12 months; 42% said the same last year. Over a three-year window, 36% of CEOs are “very confident,” a dip of nine percentage points.

When considering the overall economy, CEOs’ pessimism jumped even more—by a record amount, in fact. Nearly 30% of chief executives are expecting a decline in global economic growth in the next 12 months, up from just 5% last year. It’s true that a majority of CEOs—some 42%—think economic growth will improve in the next year, but the surge in those predicting a decline is the biggest PwC has ever recorded.

That record increase, though, “is not that surprising,” the PwC report says. After all, “most major economic models have adjusted their 2019 forecasts downward,” and many economists consider a slowdown as overdue. Survey the geopolitical landscape—with its trade tensions, tightening monetary policies, and emergence of populist leaders—and it’s not hard to see what’s causing CEO worries to crop up. In fact, this year’s top “threats,” as identified by CEOs, reflect the turbulent landscape with political uncertainty, availability of key skills, and trade conflicts, replacing terrorism, geopolitical uncertainty, and cyber threats as Nos. 2, 3, and 4. Over-regulation was the No.1 threat both years.

Courtesy of PwC

PwC’s survey of 1,378 CEOs was conducted in September and October of last year. Considering the stock market’s weak performance at the end of 2018, you can understand CEOs’ growing caution. It should be noted though, that gains in the first three weeks of 2019 have erased nearly all of last year’s losses.