CFOs See Higher Costs and Lack of Skilled Labor; Reduce Outlook for Growth

Federal Reserve Bank of Richmond (09/28/22)

Financial decision-makers lowered their expectations for real growth in gross domestic product during the third quarter amid concerns over inflation and trouble finding skilled labor, according to a survey of chief financial officers by Duke University’s Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta. CFOs said their optimism about the overall economy rose modestly from its recent low. Optimism about their own firms, though well below levels from a year ago, remained steady alongside some improvement in expectations for revenue, employment, and cost growth.

Inflation was the most pressing concern facing their firms. CFOs revised unit cost growth during 2022 down to 8.9% from 10.2% in the prior survey. These costs remain at elevated levels, and nearly all firms reported experiencing larger-than-normal cost increases. CFOs said they anticipate continuing to hire at a moderate pace, despite concerns about labor quality and availability. They noted particular difficulty hiring and retaining high-skilled workers. Roughly one-fourth expect hiring conditions to become more difficult by the end of 2022, compared with only one-tenth of CFOs who expect hiring conditions to ease.

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