The economic outlook of CEOs at US companies took a decidedly pessimistic turn in the Business Roundtable’s third quarter survey, according to survey results released Tuesday. This suggests that among treasurers’ multiple concerns today, generating new funding in areas like capital expenditures won’t be a major one.
The approximately 200 CEOs responding to the Business Roundtable’s (BRT) survey actually saw their companies’ US capital spending (capex) increasing over the next six months compared to their outlook in the second quarter—to 41 percent from 35 percent. However, the percentage that saw capex declining increased even more, to 20 percent from 13 percent. The BRT’s sub-index created from the data slipped by 2.4 percent, to 70.3, its second consecutive decline.
Hiring is another major expenditure for most companies. The survey revealed that the percentage of CEOs anticipating hiring to increase slipped mildly, to 33 percent from 34 percent, while those foreseeing a hiring decrease increased to 32 percent from 26 percent.
“The downward trend in CEO plans for investment and hiring continues to reflect reasonable caution regarding near-term prospects for modest US growth,” Randall Stephenson, chairman of Business Roundtable and Chairman and CEO of AT&T Inc, said in a statement.
Mr. Stephenson noted that business plans could be negatively affected if Washington fails to act on federal budgets, the debt ceiling and tax extenders. “Predictability is critical to spur investment and unlock economic expansion and job growth,” he added.
Unsurprising, fewer chief executives expected sales to increase, 63 percent in the third quarter compared to 70 percent the quarter before, while 11 percent saw sales decreasing compared to only 7 percent in the second quarter. The Business Roundtable CEO Economic Outlook Index, which is a composite index of CEO plans for the next six months of sales, capital spending and employment, declined to 74.1 in the third quarter of 2015 from 81.3 in last quarter 2015. The long-term average of the Index is 80.4.
Responding to questions from reporters, Mr. Stephenson acknowledged the significant issues companies and their finance departments face, ranging from currency volatility to the weakening Chinese economy to war in the Middle East. He added, however, that the BRT will aggressively lobby Congressman to deal with issues closer to home, perhaps most urgently the threat of another a government shutdown. “Congress and the Administration need to work together to pass a prudent spending plan and renew expired tax provisions. US workers cannot afford the instability that comes with inaction,” he said.
Mr. Stephenson also pointed to the need for corporate tax reform, noting the UK has lowered its corporate tax rate to 18 percent, and the US remains the only country to tax companies on worldwide revenue. He also said BRT representatives plan to visit Capitol Hill “tomorrow” to persuade Congress to vote on funding for the Export-Import Bank, which provides financing for the foreign customers of US corporations.