The 2020 Mid-Year Economic Update_long

The Economy: Not Time to Party Yet

Results from the first quarter CEO Survey better, but still reflect stagnant economy.

CEOs have improved their expectations for the economy over the next six months, according to the first quarter 2013 CEO Economic Outlook Survey from Business Roundtable. The CEO Economic Outlook Index rose from 65.6 in the fourth quarter of last year to 81 in the first quarter.

But that improvement is qualified and not a sign that we should start celebrating, according to John Engler, president of Business Roundtable.

"Everybody's feeling better, but they're not having parties," Engler said in a conference call to discuss the survey's results.

Business Roundtable CEOs expect 2.1 percent growth for 2013, a slight increase from last quarter’s estimate of 2 percent.

Primarily, CEOs said they expected to see some growth in sales over the next six months, with 72 percent expecting an increase; 6 percent expecting a decrease; and 22 percent expecting no change. Last quarter, sales expectations were slightly lower, with 58 percent expecting to see an increase, 24 percent expecting no change and 17 percent expecting a decrease.

While that's good news, it's not translating into high expectations for increased investment.

Nearly half of the respondents to the survey said they expected to make no changes to capital spending (48 percent) and employment (47 percent) over the next six months. The outlook for capital spending is a little better than for hiring, with 38 percent planning to increase capital investments versus 29 percent who plan to hire. (It's interesting to note that in a recent MDM survey of distributors and manufacturers, 70 percent had plans to hire in 2013.)

The reason, according to James McNerney, chairman of Business Roundtable and president and CEO of The Boeing Company, is that while it's better compared to last quarter, "it's not enough" to support increased employment. "It still reflects more stagnation than exciting growth."

And part of that is simply a response to the global competitive environment, McNerney said. "In order to remain globally competitive every year, we're trying to operate more efficiently," he said. "And that usually soaks up the employment that otherwise would be associated with about 2 percent growth."

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