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By Che Odom
June 17 — CEOs are lowering their expectations of U.S. gross domestic product growth for the near term, and companies are reducing their spending in the wake of Congress's failure to renew tax breaks that expired Jan. 1.
Those findings come from the Business Roundtable's survey of chief executive officers during the second quarter of 2014. The results were announced June 17 during a conference call with reporters.
“CEO expectations for both investment and growth remain well below the potential of the U.S. economy and below what we should be experiencing at this stage of a recovery,” Randall Stephenson, Business Roundtable's chairman, said during the call.
Business Roundtable, an association of chief executive officers at leading U.S. companies that advocates on economic and public policy matters, conducts the survey each quarter.
The second quarter survey was completed between May 14 and June 4. Responses were received from 131 member CEOs, 64 percent of the total Business Roundtable membership.
The survey reveals that CEOs forecast GDP growth of 2.3 percent for 2014, down from last quarter's estimate of 2.4 percent for the year, said Stephenson, AT&T Inc.'s chairman and CEO, who added that GDP growth of 2.3 percent is “well below what we should be experiencing at this stage of a recovery.”
The lower estimate comes despite the fact that more CEOs expect their companies' sales and hiring to increase during the next six months.
“We're all very cautious right now,” Stephenson said.
On the other hand, the survey's composite index of CEO outlook for the economy rose during the second quarter. The index, which measures expectations for sales, capital spending and employment during the next six months, now stands at 95.4, compared with the first quarter's 92.1 and the average level of 80.1
According to the survey, 44 percent of CEOs who participated in the survey said they plan to increase capital spending in the next six months, down from 48 percent during the previous quarter.
Congress's inability to get work done has a detrimental effect on the economy, creating a risk that chief executives must account for, Stephenson said. Even if Congress were to act by the end of the year to retroactively extend the tax breaks that expired Jan. 1, the chance for spending growth and creating confidence during the year will have been lost, he added.
“Real improvement is simply not in the cards if you don't have increased capital investment,” Stephenson said.
To contact the reporter on this story: Che Odom in Washington at firstname.lastname@example.org
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The Business Roundtable's survey results are available at http://businessroundtable.org/resources/ceo-survey/2014-Q2.
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