But for every business executive overwhelmed by the challenges of a turbulent time, there are plenty more exuding the confidence of John Morikis, president and CEO of Cleveland-based Sherwin Williams Co.
“We also continued to invest in multiple long-term growth initiatives during the year, including opening 79 paint stores in the U.S. and Canada and hiring approximately 1,400 management trainees,” Morikis told shareholders on Jan. 27.
Tom Toomey, chairman and CEO of Highlands Ranch, Colorado-based real estate investment trust UDR Inc. told analysts during a Feb. 8 earnings call: “Our full-year 2021 earnings and same-store results compare very well versus initial guidance, and operating strength persisted into 2022. Our outlook for 2022 guidance signals one of our best years ever.”
Johnson Controls International, the Milwaukee-based maker of building products including air systems and fire safety solutions, is “well positioned for accelerated growth as we leverage our OpenBlue Digital platform to capitalize on the global trend towards reducing carbon emissions and energy intensity and improving the overall health of indoor environments,” said CFO Olivier Leonetti.
The evidence that business leaders are putting their money where their mouths are is reflected in the soaring capital expenditures for business investment by the 500 companies in the S&P stock market index: $800 billion during the past 12 months, a record 12% gain in 2021 that will be exceeded this year, according to data compiled by Bloomberg.
That’s an expression of confidence that clashes discordantly with the fear of inflation evidenced by the University of Michigan Consumer Sentiment Index, which fell to its lowest measure since 2011, a year when CEO and consumer confidence fell in tandem. The current divergence is the widest in modern times, according to data compiled by Bloomberg.
But with price increases outstripping wage gains, the contrast between the pessimism of consumers and the optimism of executives is understandable. “Sky-high inflation isn't bad news for everybody,” said Bloomberg chief economist Tom Orlik. For companies with market power, Orlik explained, “rising prices means rising profits — one factor that explains CEO confidence.”
Yet there are reasons to expect consumer gloom to lift. Retail sales wouldn't be booming if people couldn't make ends meet, and most workers are being paid more per hour today than before the pandemic, even after inflation.
The economic recovery from the Covid-19 recession is stronger and faster than from the Great Recession that ended in 2009. U.S. personal income increased 7.5% in 2021, the largest yearly growth since 2000, according to data from Bureau of Economic Analysis compiled by Bloomberg.
Adults in the bottom half of the income distribution had much higher incomes in 2021 than their prior three years; income poverty was lower in 2021 and the share of uninsured low-income people under age 65 dropped in 2021.