Many Central Ohio business leaders aren’t convinced that inflation is going away anytime soon, even as a growing amount of evidence shows otherwise.
In fact, they think it could get worse in 2024.
The 13th annual Columbus CEO survey of economic conditions in Central Ohio shows that 59 percent of business leaders expect inflation to get worse in 2024. Another 4 percent expect a large increase in inflation. Only about one-quarter of the C-suite executives in companies, nonprofits and government agencies who responded to the survey expect inflation to slow next year, and 13 percent predict no change in inflation, according to the survey.
The notion that inflation isn’t going away anytime soon is something these business leaders have in common with consumers, who complain that they continue to feel the pinch of higher prices even as some costs have eased in recent months. “The findings from the University of Michigan consumer sentiment survey found exactly the same thing,” says economist Bill LaFayette, owner of economic consulting firm Regionomics, who completed the analysis of the survey for CEO. “People are thinking inflation will increase.”
Coming out of the pandemic, inflation soared to levels not seen since the 1980s. It peaked at a 9.1 percent annual rate in June 2022 and has been trending lower since, with the annual inflation rate at 3.2 percent in October, according to federal inflation data.
That puts inflation closer to the 2 percent target of the Federal Reserve, which has aggressively raised interest rates over the past year to fight rising prices.
For many business leaders and consumers, this may be their first time having to deal with inflation, and they are uncertain how to handle it, LaFayette says.
The cumulative effect of inflation also may be taking a toll on consumers who see inflation eroding their living standards, according to the Michigan consumer sentiment report from October.
“Over 80 percent of consumers specified that inflation would cause greater hardship for consumers in the year ahead than unemployment, the highest share in 11 months. … While consumers recognize that inflation has slowed down from its peak last summer, they cannot ignore that their budgets remain stretched and their purchasing power reduced,” the report said.
One potential implication is that consumers and business leaders may ramp up spending in advance of that, and that will help the economy in the short term, LaFayette says. “If your expectation is that inflation is going to get worse, you’re going to frontload your consumption,” he says. “You’re going to buy stuff now, whether you’re a consumer or a business buying equipment.”
Consumers and business leaders likely need more time to become convinced that inflation is slowing for good, he says. “You need to see it playing out in your own life for a relatively long period of time to stop worrying about it.”
Labor Availability Is a Top Concern
Finding workers continues to be a big issue for executives, although labor markets show signs of softening as a result of the steep rise in interest rates. Among survey respondents, 29 percent say finding workers ranks as their top business concern, down from 38 percent from the prior-year survey.
Job gains have slowed over the past year in the region, with Central Ohio adding just 6,700 jobs in the past year, according to state employment data, which also show the region’s unemployment rate at a super-low 3.3 percent in October.
Job openings also have decreased, falling by 16,054 help-wanted ads placed over the past year to 38,120 ads. That’s more in line with the number of ads before the pandemic started, following a surge over the past two years.
Meanwhile, business executives who responded to the survey have more favorable impressions of the quality of the Central Ohio workforce. A third of respondents rate local workforce quality as high, 54 percent rate it as adequate (up from 37 percent in 2022) and only 8 percent rate it low (down from 25 percent).
Confidence in the Local Economy
Even with worries about inflation, 60 percent of the business leaders responding to the survey expect revenue to increase in 2024, compared with 46 percent in the prior year’s survey.
About one-third expect an increase in profits this year, about the same as last year, and 20 percent are expecting profits to decrease, slightly less than last year.
Overall, respondents are more optimistic about the local, U.S. and global economies next year than this year, and 91 percent expect either a stable or growing economy in Central Ohio compared with 79 percent in the 2022 survey.
Regional Priorities for 2024
As was the case in the year-ago survey, 40 percent of business leaders identified the need for more affordable housing as a top priority.
Other priorities include improving public transportation, strengthening public education and increasing incentives for business.
The collaborative culture, cost of living, educated workforce and the presence of suppliers and customers continue to be important business advantages for the region, according to the survey. Business leaders also rank affordable living costs as the top quality of life advantage, along with the region’s family-friendly environment, welcoming community and employment opportunities.
Intel: The Good and Bad
Nearly two years after Intel’s announcement that it was investing $20 billion in Licking County, the business leaders responding to the survey continue to welcome the project and the job opportunities it presents, but acknowledge that the project will bring strains.
The perceived disadvantages largely focus on the growth pains that come with the project, including higher demands on infrastructure and services, increased traffic congestion, housing shortages, increased housing costs and workforce shortages.
Mark Williams is a business reporter with The Columbus Dispatch.
This story is from the CEO of the Year package in the Winter 2024 issue of Columbus CEO.
