High energy prices and widening concerns about negative economic fallout from the recent turmoil in credit markets appear to be influencing executive sentiment. Surveyed in mid-December, executives around the world (particularly in the developed economies of Europe and North America) said that they expected higher inflation and deteriorating economic conditions over the next six months.1 Some 41 percent expect inflation in their home countries to rise by one percentage point or more—up from 30 percent three months ago. Only 13 percent think they will have the power to raise prices during the next six months.
Despite such negative indicators, the ongoing competition for talent is clear from other survey findings: twice as many respondents expect their companies to increase as to shrink their workforce, and training and recruitment is the only area in which respondents say that investments are more likely to rise than to remain the same.
A bit more than a third of the respondents to the survey think that economic conditions in their countries will remain the same over the next six months; 37 percent believe that conditions will deteriorate, compared with only 13 percent six months ago (Exhibit 1). Respondents in Europe and North America...