CEOs prove cautious on investment, hiring plans
Global weakness, budget standoff cited
CEOs are trimming their capital investment and hiring plans over the next six months, reflecting concerns about global economic turmoil and a looming budget standoff in Washington.
The Business Roundtable’s CEO Economic Outlook Index, a composite of sales forecasts and plans for capital spending and hiring, dropped from 81.3 in the second quarter to a two-year low of 74.1 in the third quarter.
CEOs said they expect the U.S. economy to grow 2.4% this year, a 0.1 percentage point decline from last quarter’s projection.
Among the 141 CEOs who responded to the survey between Aug. 5 and Aug. 26, 32% predicted decreasing employment in their U.S. locations, compared to 26% last quarter. While 41% expect to increase capital spending, 20% see a cut in the next six months, up from 13% in the third quarter. In addition, more CEOs predict lower sales in their U.S. locations.
“The downward trend in CEO plans for investment and hiring continues to reflect reasonable-caution regarding near term prospects for modest U.S. growth,” said Randall Stephenson, chairman of the Business Roundtable and CEO of AT&T.
Stephenson said the stronger dollar, which hurts U.S. exports, international uncertainty and Chinese market turmoil are some of the main factors dampening the executives’ outlook. The global weakness also has rocked U..S markets. Stephenson noted that business plans could be negatively affected if Washington fails to act on federal budgets, debt ceiling and tax extenders, prompting another government shutdown.
“We have a problem where domestic policy is not supporting investment, hiring and economic expansion. We can’t control the international market, we can’t control China, but we in the U.S. can control our own variables,” Stephenson said. “CEOs need to be assured that the government is not going to shut down because policymakers can’t agree on spending priorities.”
The CEOs will meet with U.S. lawmakers starting Wednesday. Said Stephenson: “Congress and the administration need to work together to pass a prudent spending plan and renew expired tax provisions. U.S. workers cannot afford the instability that comes with inaction.”