Dec. 20, 2023

Business As Usual? Firm Activity Compared to Pre-Covid Levels and Implications for Monetary Policy

Zach Edwards and Daniel Weitz

As we enter 2024, an important question facing policymakers is whether the constellation of economic indicators has returned close enough to "normal" levels to merit a reconsideration of the monetary policy stance.

We explored these issues in the most recent CFO Survey by asking financial leaders nationwide how they expect their firm to perform relative to pre-pandemic levels across several key metrics. We find that, on average, firms' price and revenue growth rates are expected to remain somewhat higher than their pre-pandemic levels, though expectations for these measures have declined markedly from their post-pandemic peaks.

We also asked firms for their debt maturity profile, the proportion of maturing debt they plan to roll over and expected borrowing costs, to better understand the potential impact of increased interest rates. We find that most firms will have some debt mature by 2025 and most debt will mature by 2027. In each year through 2027, about half of firms with outstanding debt coming due plan to roll over some portion of their maturing debt. Most of these firms expect an increase in their borrowing costs. This suggests that the persistence of current interest rate levels may prove to be an economic headwind.

Firm Expectations Have Normalized Somewhat but Remain at or Above Pre-Pandemic Levels

During the COVID-19 pandemic, supply chain disruptions led to the scarcity of many goods while the subsequent economic reopening witnessed a release of pent-up demand. At the same time, labor became scarcer across many industries.

The result of these pressures was larger than normal increases in firms' unit costs, increases in the prices that firms charged for goods and services (and by extension, higher nominal revenues), and higher wages to attract workers. Firms' expectations for current-year growth in these variables peaked between 2021 and 2022 before gradually moderating. (See chart below.)

To better understand how business activity compares to pre-pandemic levels, The CFO Survey asked firms to compare their 2024 expected annual growth in revenue, prices, and employment to growth rates prior to the COVID-19 pandemic. The next graph shows that nearly 60 percent of respondents expect the percent change in prices to be higher than pre-pandemic growth, while 43 percent think (nominal) revenue growth will be higher and close to 40 percent expect employment growth to be higher. These results suggest that the pandemic-era pressures are expected to continue influencing key firm indicators into 2024 and additional time may be required for them to return to pre-pandemic levels.

With respect to wage bills, firms reported the annual percent compensation increases they provided — or will provide — for the most recent compensation round. On average, the compensation increases are lower than those reported in last year's fourth quarter CFO Survey, though, like other key metrics, they remain elevated. Last year, on average, firms offered a 5.9 percent compensation increase, well above the 4.5 percent increase that they considered normal. This quarter, businesses, on average, offered annual compensation increases of 4.6 percent. While this is still above the 4.2 percent that firms this quarter reported as normal, it marks a notable decrease from last year and a step closer to pre-pandemic norms.

Is There Evidence that Policy Will Cause Further Tightening?

In Q3 2023, we asked firms whether the current policy rate, absent any changes, would impact their future spending decisions and found that it would for some firms. This quarter, we asked businesses about their outstanding debt and the expected impact of maturing debt in a higher interest rate environment.

Seventy percent of respondents had existing debt. This share was notably higher among larger firms (>500 employees) relative to smaller firms. (See chart below.)

Among firms that have debt, on average, about one-third of current outstanding debt will come due by the end of 2025, and about half of the firms with maturing debt plan to roll over some or all it. Most of these firms also reported expecting higher interest costs. In all, this suggests that the effects of recent rate increases have not yet fully materialized.


The Q4 CFO Survey suggests that for many firms, expectations for key indicators have returned closer to "normal" levels that prevailed prior to the COVID-19 pandemic. The CFO Survey suggests that additional progress is required to fully return growth in revenue, prices, employment, unit costs, and wages to their pre-pandemic trends. The length of time that this will take is uncertain, though evidence from The CFO Survey suggests the persistence of high interest rates may over time weigh on economic activity.

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