Survey shows corporate uneasiness tied to Eurozone, deficit crises

Alexis Levinson Political Reporter
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American CEOs’ projections for the next six months of economic growth have been largely consistent since last quarter, tempered by concerns over the European debt crisis and uncertain economic policies in the States, according to Business Roundtable’s Q4 Economic Outlook survey, even as Congress has failed to trim the federal budget deficit.

Business Roundtable conducts the survey four times each year, surveying its member CEOs about their expectations for sales, investment, and hiring, and uses that data to compile an index. Boeing CEO W. James McNerney, who chairs the organization, described the result as a “quick snapshot of economic conditions for the next six months.”

The index is a number between -50 and 150, with any number below 50 suggesting that the economy is shrinking and a number above 50 suggest that the economy is expanding.

The Q4 survey scored 77.9, a number largely unchanged from the third quarter’s 77.6 index. That, McNerney said, “is in positive territory.”

Sixty-eight percent of member CEOs said they projected an increase in sales over the next six months, up slightly from 65 percent last quarter. Twenty percent said they expect sales to remain the same, slightly down from 22 percent. Just 12 percent said they expected sales to decrease, a negligible decrease from last quarter’s 13 percent.

The survey also asked CEOs to rank their top cost pressures for the year. It found materials costs, regulatory costs and healthcare costs topped the list. Labor costs were the fourth most cited concern.

CEOs’ hiring expectations have remained virtually unchanged since last quarter. Thirty-five percent say they expect to add employees in the U.S., compared to 36 percent last quarter. Forty-two percent projected static employment, down two points from Q3. And 24 percent projected lower employment, the same percentage as last quarter.

In terms of investment, 32 percent expect higher capital spending, unchanged from the last survey. Fifty-two percent expect the same spending levels, down from 55 percent, and 16 percent expect spending to decrease, slightly more than the 13 percent.

Other things that factored in to CEOs economic projections were outside factors, like “continuing concerns about European sovereign debt issues a well as lingering uncertainty regarding issues here at home, including business and personal tax policies and the failure of congress to reach agreement on deficit reduction plans,” said McNerney. He also cited high oil prices.

The European crisis, he said, would have an effect on businesses whether or not they do business in Europe “because there is no way to de-link some kind of a financial event in Europe from impacting everyone’s business.”

The super committee’s failure to solve the defitcit crisis, he said, has also left too much “uncertainty” in the business community.

McNerney cautioned that the survey was “raw data,” and not a comprehensive view of the country’s economy.

“There may be things that the economists or the Federal Reserve see that we don’t feel under our feet,” he said. “So treat this as sort of a bottom-up forecast from people who are in the trenches.”

“It’s going to get a little bit better next year,” he added. “It’s just not blowing the roof off.”

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