CEOs’ Economic Outlook Dims as More Plan to Pull Back Investment – Real Time Economics

Randall Stephenson, chief executive officer of AT&T Inc.
ANDREW HARRER/BLOOMBERG NEWS

Chief executives’ view of the U.S. economy dimmed in recent months, a factor causing business leaders to pull back on plans to invest in their companies.

CEOs’ outlook on the economy declined for the third straight quarter, according to a Business Roundtable survey released Tuesday. The same survey showed that 27% expect to decrease capital spending over the next six months—the largest share planning to scale back investment since the middle of 2009, when the economy was just emerging from recession.

AT&T Inc. CEO Randall Stephenson, chairman of the Business Roundtable, said uncertainly in Washington, especially around tax policy, is driving worries about the economy.

“Companies are putting capital budgets together right now and don’t have a clear line of sight on what their tax bill will be on those investments,” he said on a call with reporters Tuesday. “When the tax code is uncompetitive, like ours is, it has the effect of incentivizing investment elsewhere” in the world.

CEOs that are members of the trade group representing the largest U.S. businesses are waiting to see if Congress will renew dozens of tax breaks for businesses, known as “tax extenders.” Firms need clarity on those polices, as well as highway funding and the fate of the Export-Import Bank, Mr. Stephenson said.

Uncertainty around fiscal policy combined with worries about terrorism and a slowdown in China and other overseas economies are causing CEOs to be cautious, he said.

The Roundtable’s CEO Economic Outlook Index dipped to 67.5 in the fourth quarter. That’s down from 74.1 in the third quarter and the lowest reading since executives saw the economy contracting during the recession. Readings above 50 indicate expansion.

The CEOs forecast the economy to grow 2.4% next year, a pace roughly in line with the first six years of the expansion.

The survey showed a slightly higher share of CEOs expect sales to decline in the next six months, compared with the prior quarter, but the majority still expect sales growth. CEOs’ hiring plans were essentially unchanged from the summer, with about a third expecting to add staff and a third expecting to cut.

The fourth-quarter survey polled 140 CEOs between Oct. 14 and Nov. 4.

Related Reading:

Companies Shy Away From Spending

Expiring Tax Breaks Face Another Nail-Biter This Year

Economists React to Third-Quarter GDP: ‘Positive for Consumers’

Businesses Are Stocking More Than They’re Selling. What Does It Mean?

 


 


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1 December 2015 | 4:59 pm – Source: blogs.wsj.com

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