Inflation not going away, could get worse, central Ohio business leaders say

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 annual Columbus CEOsurvey of business leaders on economic conditions in central Ohio shows that 59% of them expect inflation to worsen in 2024. Another 4% 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% predict no change in inflation, according to the survey.

The notion that inflation isn't going away anytime soon is something the 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," said 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 9.1% annual rate in June 2022 and has been trending lower since with the annual inflation rate at 3.2% in October, according to federal inflation data.

That puts inflation closer to the 2% 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 dealing with inflation, and they are uncertain how to handle it, LaFayette said.

The cumulative effect of inflation also may be taking a toll on consumers who see inflation eroding their living standards, according to the October Michigan consumer sentiment report.

"Over 80% 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, which will help the economy in the short term, LaFayette said.

"If your expectation is that inflation is going to get worse, you're going to frontload your consumption," he said. "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 said.

"You need to see it playing out in your own life for a relatively long period of time to stop worrying about it," he said.

Labor availability still top concern for business execs

Finding workers continues to be a big issue for executives even as labor markets show signs of softening due to the steep rise in interest rates.

Of those surveyed, 29% say finding workers ranks as their top business concern, below the 38% from the prior year's survey.

Job gains have slowed over the past year in the region, with central Ohio adding just 6,700 jobs over the past year, according to state employment data showing the region's unemployment rate at a super low 3.3% in October.

Job openings have also decreased, falling by 16,054 help-wanted ads over the past year to 38,120 ads. That's more in line with the number of ads before the pandemic started after a surge over the past two years.

Meanwhile, impressions of the quality of the central Ohio workforce have improved. A third of respondents rate local workforce quality as high, half rate it as adequate, and only 8% rate it as low.

Business leaders confident about the local economy

Even with worries about inflation, 60% of the business leaders surveyed expect revenue to increase in 2024 compared with 46% in the prior year's survey.

About one-third expect an increase in profits this year, about the same as last year, and 20% expect profits to decrease, slightly less than last year.

Overall, more executives surveyed are more optimistic about the local, U.S., and global economy next year than this year, and 91% expect either a stable or growing economy in central Ohio compared with 79% this year.

Regional priorities for 2024

As was the case in the year-ago survey, 40% 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, workforce, and the presence of customers continue to be important business advantages for the region, according to the survey. Business leaders also rank affordable living costs as big advantage, along with the region's family-friendly environment and good 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 surveyed continue to welcome the project and the job opportunities it presents but do acknowledge that the project will bring strains.

The perceived disadvantages largely are about 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.

mawilliams@dispatch.com

@BizMarkWilliams