Macroeconomic Outlook: Goldilocks and the Many Risks

By Stan Aronow | February 24, 2023 | 0 Comments

Supply ChainBeyond Supply ChainSupply Chain Strategy, Leadership and Governance

Earlier this week, Gartner held an event for our COO and CSCO communities that included a talk by Professor Nick Bloom, a macroeconomist at Stanford University. It was nearly a year to the day since he joined us for his last session and remarkable to note how much had changed in the economy and world versus simply maintaining a trendline.

While factors impacting the New York Federal Reserve’s Global Supply Chain Pressure Index have moderated significantly, the geopolitical environment feels more fraught, with tensions ramping up between the West and both Russia and China. On the day of our event, Russia announced that it would suspend its participation in the last remaining nuclear-arms treaty with the United States.

A Precarious Balance With Risks Aplenty

Bloom’s summary assessment was that a balance of positive and negative forces in the post-pandemic cool-down has led us to our current “Goldilocks economy.” His 2023 forecast for the U.S. economy is a 70% chance of a soft landing, 20% chance of no landing (i.e., inflation remains above 2%) and a 10% chance of a nasty recession. When we polled our COO and CSCO community, they were a bit less sanguine. More than 70% of COO/CSCO poll participants see the probability of a 2023 recession in the United States as between 0% and 40%. Further, nearly half of respondents expect a 41% to 60% chance of recession in Europe this year.

We spent a lot of time discussing potential wildcard risks that might knock the global economy out of its delicate balance. When asked to select the top three potential disruptors in 2023 for their businesses and supply chains, the community highlighted geopolitical escalations (79%), stubborn inflation driving monetary tightening and recession (67%) and finally energy market shocks (29%), as a distant third.

Supply chain leaders remain caught between business leaders seeking cost savings — almost half expect reductions between 6% and 10% of total spend — and input costs that continue to inflate. Some operational executives (e.g., in consumer products) are seeing signs of disinflation, but the overall group anticipated 2023 commodity inflation of between 3% and 6% and wage increases for office and frontline workers between 3% and 4% and 3% and 10%, respectively, in developed markets.

Other Community Learnings

Bloom is one of the world’s leading authorities on hybrid work and shared the myriad ripple effects that this trend is having on the broader economy, post-pandemic:

  • Interestingly, e-commerce as a percentage of total retail has returned to its pre-pandemic trend but remote working has stuck at a level of 25% to 30% vs. 5% of total hours spent remote, pre-pandemic.
  • Over the last few years, new business formation has boomed, particularly in the United States. The overall start-up ecosystem was fueled by people working from home. The shift from commercial office space to utilizing home offices dropped start-up overhead costs. Less visible was the ability for founders to multitask while still holding hybrid or remote day jobs at established companies.
  • Employees working from home have also enjoyed additional schedule flexibility. As a result, many hometown services businesses such as hair salons and golf courses have seen demand balance more evenly across weekdays and weekends. By contrast, many metro transit systems are experiencing low ridership on Mondays and Fridays, threatening their financial viability.
  • The group also discussed the tradeoffs between flexible remote working and having office face time, particularly for younger employees. Bloom’s research shows that many Gen-Z employees vastly prefer hybrid working, with a few days in the office, to being either fully remote or in-person. One study shows that for new graduates, having the flexibility to work in a hybrid way is viewed as the equivalent of a 100% in-office job with 8% higher pay.

It was inspiring to hear the level of conversation and passion for these topics across the supply chain community. We look forward to the next gathering of our global COOs and CSCOs at our May Leaders Forum event in Orlando, Florida, centered on the theme: “Our Supply Chain Renaissance.”


Stan Aronow
VP Distinguished Advisor
Gartner Supply Chain


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