Despite a relatively uncertain economic cycle, the leaders of America’s top companies showed a slight uptick in their expectations for the economy over the next six months, according to Business Roundtable’s fourth quarter 2007 CEO Economic Outlook Survey.
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The CEO Economic Outlook Index, which indicates how CEOs believe the economy will perform in the six months ahead, improved moderately, rising more than two points from last quarter’s 77.4 to 79.5.
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This quarter’s survey suggests that CEOs, as a whole, still see the economy as steady and that the vast majority expect their sales, capital spending and employment levels to either increase or remain steady in the first half of 2008,” said Harold McGraw III, chairman of Business Roundtable and president and CEO of The McGraw-Hill Companies.
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During a conference call with reporters, McGraw responded to questions on whether the CEO respondents were concerned enough over a credit crunch, energy prices and the housing recession. “We don’t know the effect of certain things that are coming and what could influence consumers to do things differently, but the survey is not event-sensitive in that way. It’s an assessment of their business and how they think their business is going to be able to perform in the next six months,” he said. “So I wouldn’t read into it that people aren’t concerned about the credit crunch or not concerned about energy prices or the housing recession.
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“I think it just says that, taking it all in, they think that for their businesses they are going to be in reasonably good shape for the next six months.”
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The CEOs are expecting slower GDP growth over the next year, assuming growth of 2.1%. “They are building that into their business plan,” McGraw said.
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In response to the annual question on cost pressures facing their businesses, a majority of CEOs cited energy and health care expenditures, equally, as their greatest fiscal pressures. About 32 percent of respondents identified health care and energy. The concern over energy costs has doubled from last year, when 16 percent of CEOs cited energy expenditures as the top cost.
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Following energy and health care, other CEO cost pressures in this year’s survey were material costs (17 percent), litigation costs (10 percent), labor costs (5 percent), and capital costs (1 percent).
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The Roundtable’s CEO Economic Outlook Survey, which has been conducted quarterly since the fourth quarter of 2002, provides a forward-looking view of the economic assumptions and outlooks of Roundtable companies. Business Roundtable, an association of chief executive officers, represents a combined workforce of more than 10 million employees and $4.5 trillion in annual revenues.
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The full survey can be found here