CEO Insights for What's Ahead | 1.31.24
Number of the Week: 3.3%
US Consumers Power Surprising GDP Growth and Resurgent Confidence
US Real GDP rose by 3.3% (annualized) during Q4 2023. That’s down from Q3’s blowout 4.9%, but well above the consensus forecast of 2.0%.
Consumption growth fueled most of the expansion in Q4, but government spending and net exports also impressed. For 2023 as a whole, Real GDP expanded by 2.5%.
Indominable consumers? Following a lull earlier in 2023, consumption continued to expand at a robust pace of 2.8% in Q4. Spending growth in the quarter was driven by consumption of both goods and services—and was supported by an increase in real disposable income.
Consumers remain bullish in the new year. The Consumer Confidence Index® rose 6.8 pts in January 2024 to 114.8 (1985=100)—a two-year high after three straight monthly gains.
The TCB take: GDP’s upside surprise in Q4 makes interest rate cuts by the Federal Reserve less likely in the near term. However, as inflation rates continue to cool over the coming months, we expect the Fed to begin making cuts starting in Q2 2024.
Younger CEOs Need Seasoned Board Members by Their Side
While most US public company CEOs are 50 years or older, the share in their 30s and 40s is inching up. In 2023, 16% of Russell 3000 CEOs were 40–49 years old, compared to 13% in 2017.
Seasoned directors play a critical role: At large companies, corporate directors are, on average, five years older than CEOs (63 for directors vs. 58 for CEOs). In addition, directors often have more institutional knowledge and experience with the company: While the average tenure of directors is 9.5 years, it’s just 6.5 for CEOs.
The TCB take: Many directors have navigated challenges that younger CEOs may have limited (or no) experience addressing, such as managing through elevated inflation and severe geopolitical turmoil. Companies should view their directors’ age and experience as a strategic asset.
Companies also need robust board education and engagement programs, and to ensure directors are fluent in the latest relevant developments in areas such as AI and sustainability.
Why Credentials Should Take a Backseat to Skills
At a time of rapid change in the workforce and workplace, businesses must adapt to changing demands faster than ever. By focusing on the skills workers have—and those they need—rather than job roles and credentials, organizations can be more agile and resilient.
Not for everyone: Becoming a skills-driven organization takes considerable time and resources. Leaders should assess whether their businesses would benefit from a focus on skills.
The TCB take: Ultimately, every organization must determine what it hopes to gain and what it’s prepared to change in its workforce. Leaders must champion such efforts to achieve the benefits of becoming a skills-driven organization, and the organizational culture must support a new way of thinking about people and work.
In 2024, More Than Half the World Will Vote…Amid Record Misinformation
This year, more than half the world is going to the ballot box: 4 billion people in 70 nations are expected to vote in elections, including in the US, UK, India, Russia, and Taiwan. The outcomes of these sweeping elections will shape the geopolitical dynamic for years to come.
Democracy is at stake: For nearly two decades, the world has seen an ongoing decline in democracy. Now, the rapid advancement of AI—and the resulting explosion of misinformation—have injected another level of distrust into an already strained system. This year’s elections will call into question the extent to which elections are truly free and fair.
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High-impact elections: Taiwan’s election is perhaps the most important election for geopolitical stability; China’s reaction will have important ramifications. While Russia and India have election outcomes that are more predictable, the election dynamics will determine the future trajectory of these important nation-states.
All eyes on the US: The most important election—not just for the US, but for the world—will be America’s election. Its outcome will have implications for geopolitics and the world’s economy—an outcome for which CEOs will need to be prepared.
CMOs Will Be Leading Actors in Driving Profits and Growth in 2024
While recession fears remain their top concern, CEOs will also be searching for growth in 2024—and beyond.
According to our C-Suite Outlook 2024, the top areas CEOs are investing in to drive growth in the next 3-5 years include innovation (36%), new lines of business (31%), digital transformation (26%), and marketing/promotions (24%).
CMOs are optimistic: CMOs are confident they will deliver growth—and optimistic that investments in automation, AI, and innovation will drive productivity and unlock new markets. They also see opportunities to cut "nonworking" costs from their expenditures and improve their in-house talent.
New meets old in marketing: The survey also reveals a fascinating coalescence of approaches CMOs intend to use to drive growth. Some of their top areas for increased investment include the emerging capabilities of data, analytics, and AI—but these are combined with a rising investment in advertising and brand presence. IVAN POLLARD , former global CMO and current Leader of the Marketing & Communications Center at The Conference Board, joined the CEO Perspectives podcast to discuss these findings.
QUOTABLE:
Consumer Confidence Hits a Two-Year High
“Business conditions are better than they were throughout much of last year…Most people are working. They’re seeing their real incomes rise with reduced inflation...And so, overall, just about every age and income group was more optimistic in January.”
— Dana M Peterson , Chief Economist of The Conference Board. She joined the CEO Perspectives podcast to discuss our monthly Consumer Confidence Index®.
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