Americans are down on the economy, but CEOs are full of optimism

Americans are feeling significantly worse about the economy than they were a month ago, with consumer sentiment tumbling across ages and income groups.

CEOs, though? They’re more optimistic than they’ve been in years.

Two surveys this week show a stark and growing divergence between heads of businesses and the rest of the country when it comes to the economy. Consumers are jittery, in part because of fears that new tariffs could worsen inflation. Executives, however, are hopeful about fewer regulations and are planning to boost investments.

“Businesses and consumers focus on very different things, and that’s what we’re seeing here,” said Stephanie Guichard, senior economist at the Conference Board. “Businesses care about deregulation and potential tax cuts. For consumers, it’s all about prices.”

Consumer sentiment had generally been rising since June, buoyed by optimism that inflation was improving, according to a closely watched metric from the University of Michigan. But this year, it has tumbled for two months in a row.

Not only are Americans feeling worse about the current state of affairs, they expect things to get worse: The long-run economic outlook is at its lowest level in over a year. And Americans now expect prices to rise another 4.3% in the coming year, a full percentage point higher than they did in January. That is more than double the Federal Reserve’s 2 percent inflation goal and higher than January’s 3% reading.

“Trump 2.0 fiscal policies to date are apparently an unmitigated disaster for consumer confidence with expectations of Washington-grown inflation soaring,” Christopher Rupkey, chief economist at Fwdbonds, wrote in a note to clients Friday. “The public’s fears have soared in just the last two weeks.”

Walmart this week warned that sales and profit growth may slow this year, as shoppers pull back in the face of growing “uncertainties.” That sent shares of its stock down 6 percent on Thursday, with investors fretting over a slowdown at the world’s largest retailer.

But that pessimism hasn’t made its way up to the country’s C-suites. The Trump administration has promised a swath of corporate tax cuts and sweeping deregulation, helping drum up support among business owners. Overall, CEOs are “substantially more optimistic” about the economy than they were a few months ago, according to a Conference Board survey of 134 chief executives of Fortune 500 companies released this week.

“This is a very unique situation: increasing CEO confidence at a time of increasing uncertainty,” Guichard said. “For CEOs, one of the major uncertainties of 2024—the election—is over, and they expect the new administration to be very business-friendly. That’s what’s behind a lot of this confidence.”

CEOs were generally less worried about cyberthreats, financial and economic risks, and supply chain disruptions than they were last year, the survey found. However, a growing share—55 percent, up from 52 percent a quarter ago—said they considered geopolitical instability a “high impact risk” for their industry.

Many titans of business, including the CEOs of Hilton Worldwide and Wells Fargo, have recently talked about optimism for President Donald Trump’s policies. Bank of America CEO Brian Moynihan last month said the specter of loosening regulations had already offered a boost to business morale.

“American companies can now go out domestically and around the world and be the kings they’re supposed to be,” he told Fox Business. “The enthusiasm by our team for what’s ahead is far greater than it was in the fourth quarter because that was sort of under the old regime.”

Most immediately, economists say the Trump administration’s sweeping overhaul of government agencies and watchdogs has sent a pro-business message while also rattling consumers, who could soon face fewer safeguards and protections.

“The new administration has dismantled entire government agencies and regulators,” said Laura Veldkamp, an economics and finance professor at Columbia Business School. “They’ve gotten rid of all of these safeguards and basically said to businesses: ‘Feel free to profit from American consumers any way you see fit.’ So yes, businesses are feeling confident in their ability to make a profit, but they’ve also heaped new risks and costs onto consumers.”

Still, some economists cautioned against reading too much into the latest “economic vibes.”

“I’m suspicious of sentiment surveys because they’re increasingly biased by political perspective,” said Mark Zandi, chief economist at Moody’s. “From a CEO perspective, this stronger sentiment reflect that they feel like policy’s got their back. But sentiment is a very fickle thing. It’s very ephemeral. So if growth slows and inflation picks up because of immigration policies or tariffs—well, we’ll see how long this lasts.”