Fortune 500 Executives Cite Inflation as Biggest Concern for U.S. Economy in New Survey

by Taylor Cunningham
(Photo by Mario Tama/Getty Images)

This quarter’s survey of Fortune 500 chief financial officers is forecasting a grimmer economy than expected. And most of the CFOs agree that inflation is to blame.

At a Glance

  • Out of 97 Fortune 500 CFOs asked in a quarterly survey, 36% believe that the economy is headed in the right direction.
  • The number is up from last quarter’s poll.
  • CFOs believe there are many reasons the economy is weakening. But record-high inflation seems to be the most pertinent.
  • And some specialists believe that government spending is the root cause of the inflation.

Fortune 500 CFOs Cite Inflation for Worsening Economy

In the previous quarter, the Deloitte survey found that 45% of the 97 participating CFO thought that the U.S. economy was improving from its pandemic state. But this quarter, only 36% were as optimistic.

And when it came to their own companies, the financial gurus were even less hopeful. When asked if they thought their companies would be more profitable over the next year, just 38% said yes, which is down from 49% in the fourth quarter.

Participants cited a few reasons for the dismal economy, such as the Ukraine war, domestic political unrest, and burgeoning tensions with China.

Most of the CFOs also worry that new fiscal policies, regulations, and taxation could take a toll. Of course, supply chain issues, as well as rising interest rates, also made the list. And employee retention and burnout are ongoing problems with most businesses.

But all of the Fortune 500 CFOs agreed that the main culprit bringing down the economy is ever-rising inflation, with wage and material costs being the biggest factors. And a new San Francisco Fed study says that the government is to blame.

San Francisco Fed Blames Economy Busting Inflation on Government Spending

While many lawmakers have been arguing over the cause of record-high inflation, the Federal Reserve Bank of San Francisco says it’s honed in on the true cause. And that cause is government spending.

“Fiscal support measures designed to counteract the severity of the pandemic’s economic effect may have contributed to this divergence by raising inflation about 3 percentage points by the end of 2021,” Òscar Jordà, Celeste Liu, Fernanda Nechio, and Fabián Rivera-Reyes in the San Francisco Fed wrote in a weekly Economic Letter.

Since the pandemic hit, Congress has passed trillions of dollars in aid to help struggling households and businesses get by. In total, around $6 trillion in relief measures has left the government. And the money has sent the economy spiraling.

However, the Fed also noted that if the government hadn’t reallocated the funds, the economy could be in worse shape. Because not helping people stay afloat during shutdowns may have led to a recession and high unemployment.

“Without these spending measures, the economy might have tipped into outright deflation and slower economic growth, the consequences of which would have been harder to manage,” they added.