Top financial executives in the US are generally pessimistic about the economy in 2023, according to today’s release of the CFO Survey, a collaboration between Duke University’s Fuqua School of Business and the Federal Reserve Banks of Richmond, Virginia, and Atlanta. While CFOs expect price growth to subside in 2023, inflation remains the top worry.

The survey found that CFOs’ optimism about the US economy remains at 53 on a scale of 0 to 100, the same as last quarter but well below the historical average of about 60. In addition, CFOs expect real GDP to grow by only 0.7% in 2023, with 31% expecting negative growth. They also anticipate their companies’ revenues to grow by only 5% in 2023, down from last quarter’s 2023 forecast and less than anticipated 2022 revenue growth.

About two-thirds of CFOs report that current interest rates have not affected their capital expenditures or non-capital spending plans. At the same time, about 30% say that rates have already dampened spending plans. Meanwhile, nearly 40% say they either have already curtailed spending plans or would curtail spending should interest rates increase by another two percentage points.

According to the survey, CFOs’ median expectation is for input costs and product prices to increase by 5% and 4%, respectively, in 2023. Most companies reported including a cost-of-living adjustment in the wages they pay their employees.

However, total wage adjustments recently averaged about two percentage points below 2022 growth in the Consumer Price Index. Among companies that include an explicit cost-of-living adjustment to wages, this adjustment will average 3.3%, in addition to merit increases.

“A 3.3% inflation adjustment suggests that CFOs expect price pressures to soften somewhat in 2023 but remain above pre-pandemic inflation levels,” said Fuqua professor John Graham, academic director of the survey. “Inflation remains the top worry of CFOs, alongside availability and quality of labor, followed by tightening monetary policy. This list of challenges is causing CFOs to be pessimistic about the overall economy in 2023.”