U.S. CEO economic forecast remains near 3-year low
Chief executive officers of large American companies are not becoming more upbeat on the U.S. economy in 2016 than they were in the fourth quarter of 2015. The Business Roundtable CEO Economic Outlook Index rose slightly from 67.5 in the fourth quarter of 2015 to 69.4 this year. The long-term average for the index is 79.9.
While not exactly a ringing endorsement of the direction of the U.S. economy, the slim improvement does bring to an end three consecutive quarters of a declining index. The figure is calculated based on sales, hiring and capital spending forecasts for the next six months.
According to the fourth-quarter data, over the next six months, CEO expectations for sales increased by 8.5 points and their plans for capital expenditures increased by 7.1 points. The group’s second GDP forecast for 2016 indicated expected growth of 2.2%, down from the prior estimate of 2.4%.
Hiring plans fell by nearly 10 points compared with the prior quarter. In the fourth quarter of last year, some 35% of CEOs had plans to increase hiring; that number has slipped to 29%, while the percentage expecting to reduce employee counts rose from 34% to 38%.
Doug Oberhelman, chairman of Business Roundtable and chairman and CEO of Caterpillar, said: “Mixed expectations for near-term sales, investment, hiring and growth point to an economy that continues to lack momentum. These results only reinforce the need for Congress and the Administration to act this year to enact policies that boost job creation and economic growth, such as quickly ratifying the TPP [Trans-Pacific Partnership], modernising America’s outdated business tax system, and embracing a smart regulatory environment.”
The first quarter 2016 survey was completed between February 10 and March 2. Responses were received from 141 member CEOs. The data are used to create the Business Roundtable CEO Economic Outlook Index and sub-indexes for sales, capex and hiring expectations, where readings at 50 or above indicate an economic expansion and readings below 50 indicate an economic contraction. The survey has been conducted quarterly since the fourth quarter of 2002.