2023 is arriving with plenty of uncertainty, as recession prospects, continued inflation concerns, and the potential for a consumer spending pullback are all clouding forecasts.
But corporate capital spending looks to continue to forge ahead, according to the results of the recent CNBC CFO Council Q4 survey.
More than one-third of respondents said that they expect their company's capital spending to increase over the next 12 months, while 39% said their capital spending will stay about the same as last year. Only 22% said that spending would decrease.
An equal percentage of roughly 40% of CFOs say their company's headcount will also remain the same next year as those who expect it to increase.
The CNBC CFO Council Q4 2022 survey is a sample of the current outlook among top financial officers. It was conducted among 23 chief financial officers at major organizations between Nov. 30 and Dec. 20
KPMG Chief Economist Diane Swonk said at the CNBC CFO Council Summit in November that the firm's recession scenario "has less of a blow to investment to a traditional recession."Â
"Part of that is because of the backlogs, and part of it is also because we're in an environment where large firms are now looking at labor-saving technologies because the U.S. labor shortages we're facing are not cyclical," she said.Â
Peter Boockvar, chief investment officer at Bleakley Financial Group, said at the Summit that he views corporate capital spending going forward as "bifurcated."Â
"You're going to have the strong companies with a strong balance sheet that are going to take advantage of other weaknesses from other companies," he said. "Small and medium-sized businesses, if their cash flows are going to shrink, they're going to have less money to invest.Â
"The strong and healthier will take advantage of other weaknesses and get stronger," Boockvar added.
As the CFO outlook on spending and investment plans remained relatively stable even amid the weakened economy and stock market last year, it's unclear what could shift that thinking. Roughly 65% of CFOs responding to the survey said they think inflation has already peaked, while more than 80% are already forecasting a recession for 2023.
Perhaps the Fed could have an impact on those investment plans, as suggested by Landry's Chairman & CEO Tilman Fertitta last week on CNBC's "Taking Stock 2023" special.
"As you keep raising rates, companies can not do their cap funds for new projects, they're not going to borrow money for new projects," Fertitta said. "We've been raising rates for 12 months and look what small effect we've had on the economy."
In Fed Chair Jerome Powell's most recent public speech on Nov. 30, he suggested that small interest rate increases are likely ahead as "it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down."
However, he also said that "Despite some promising developments, we have a long way to go in restoring price stability."
In CNBC's most recent Fed survey in November, the group of 34 economists, investment strategists, and money managers polled nearly unanimously expected another 75 basis points of rate hikes in 2023.
The expectation is a terminal rate of 5.15% in April 2023, with rates staying there for nine months, a slight decline in the "higher for longer" timeline compared to the previous surveyÂ
If either of those things changes, would that shift the outlook on corporate spending? Perhaps this week's JOLTS report, the release of the Fed's latest policy meeting minutes and Friday's December jobs report will provide some clues as to what Powell might do in 2023.
