Consumers and corporate chieftains are heading in the opposite direction, with one group still brimming with good thoughts about the future and the other sure that tougher times are coming.
Recent surveys exemplify a trend that began a few years ago and has accelerated over the past several months. The gap between sentiment is broad and growing, though there’s some reason to believe that a change could be coming.
Chief executive officers and chief financial officers see an economy that is heading into a slowdown if not an outright recession. Recent surveys show that CEOs believe recession is the biggest risk in 2020, while almost all CFOs surveyed by Deloitte think the economy is likely to at least slow.
They view the U.S.-China trade war, a slowing global picture and increasing headline political risks as threats to the decade-long expansion that is the longest in American history.
But consumers are in the opposite camp.
While sentiment has leveled off from record highs, they still view conditions as generally positive. Spending remains strong even amid a growing savings rate, as consumers remain the beneficiary of a 50-year low in the unemployment rate and historic highs for the stock market.
The difference could be a simple matter of perspective.
Whereas consumers tend to focus more on conditions closer to home, corporate executives take a more global view. The tariff exchange coupled with a more pessimistic view on global growth has brought down executive hopes for the future.
“One of the reasons corporate confidence has fallen is because the global economy has been weak, and that preceded the trade spat,” said Joseph LaVorgna, chief economist for the Americas at Natixis. “We could be in one of those situations where CEO confidence is just reflective of what’s been a weaker global economy but not necessarily a weaker U.S. economy.”
Even the global picture may be getting better.
The U.S. and China are about to sign off on the first phase of a trade deal that at least will forestall any further aggression, eliminating one key unknown. Estimates also are improving, with the World Bank on Wednesday modestly upgrading its 2020 global GDP forecast to 2.5%.
Closer to home, fourth-quarter growth is now likely to be 2.3%, according to the Atlanta Fed, which in November had a 0.3% projection.
Sentiment surveys often are seen as a leading indicator. But with conditions improving, the downbeat outlook from corporate executives might instead reflect rear-view mirror thinking.
LaVorgna thinks an upswing in housing a bottoming in the beleaguered manufacturing sector could be key.
“Consensus is way too negative for 2020,” LaVorgna said. “These things [housing and manufacturing] have a tremendous ability to reinforce confidence on the upside. When that happens, you’ll see CEO confidence on the upturn.”