Taxes, global concerns make US CEOs wary
Index falls for third straight time to 67.5 in fourth quarter from 74.1 in the previous quarter
The economic expectations of leading US chief executives have dropped to the lowest level in three years amid concerns about taxes and the global economy, according to survey results released on Tuesday.
Reduced expectations for sales and capital spending over the next six months pushed down the quarterly economic outlook index from the Business Roundtable, a trade association of CEOs of the largest US corporations.
It was the third straight decline for the index, which fell to 67.5 in the fourth quarter from 74.1 in the previous quarter, the group said.
The index’s long-term average is 80.1 within its range of 150 to negative 50. It dropped to negative 0.5 at its low during the Great Recession and has reached as high as 113 during the recovery.
“Lower expectations for sales and investment reflect CEOs’ ongoing caution about the nearterm prospects for US economic growth,” said AT&T Inc Chief Executive Randall Stephenson, the group’s chairman.
Still, short-term hiring plans held steady in this quarter’s survey, with 35 per cent of respondents expecting to increase their company’s workforce over the next six months.
The more pessimistic overall outlook was caused by several factors, Stephenson said.
The Paris terrorist attacks could make consumers and businesses more cautious. And exports have been hurt by the slowing global economy and strong US dollar, he said.
Meanwhile, CEOs are concerned that Congress has yet to extend some key expiring tax provisions, including one for research-and-development expenses, while broader efforts to overhaul the corporate tax code appear stalled.
The US has the highest corporate tax rate of the major developed countries that make up the Organisation for Economic Development and Cooperation.
That 35 per cent rate is pushing US firms such as Pfizer Inc, to try to lower their taxes through a tactic known as inversion that shifts their corporate headquarters abroad, Stephenson said.
With CEOs concerned about taxes and increased government regulation, just 30 per cent of the survey respondents said they planned to boost capital spending over the next six months. That was down from 41 per cent in the third quarter.
“To see that kind of sharp drop in plans for capital investment is alarming,” Stephenson said.