The nation’s top executives painted a grim picture of what the economic landscape will look like over the next six months, predicting declines in sales, capital spending and employment and a contraction of the overall U.S. economy, according to a survey released Tuesday.
The latest quarterly Business Roundtable CEO Economic Outlook Survey, which was completed between March 16 and March 27, shows 67% of the country’s leading chief executives expect declines in their companies’ sales over the next six months, compared with 45% in the fourth-quarter 2008 survey. Only 24% said sales will increase, compared with 38% in the last quarter.
The CEOs surveyed also expect more declines in their companies’ capital spending, with 66% predicting a decline compared with 52% last quarter.
In terms of employment, 71% of the executives said they see their companies reducing the number of jobs in the next six months, compared with 60% last quarter. Only 7% believe they will add employees, compared with 9% last quarter.
The results put the CEO Economic Outlook Index at a reading of -5.0 for the first quarter of 2009, compared with a reading of 16.5 in the previous quarter. While the reading declined, it did not decline as sharply as the previous quarter, when the reading had fallen from 78.8, Business Roundtable said. A reading below 50 is consistent with overall economic contraction.
The deterioration in CEO sentiment reflects reduced consumer demand both in the U.S. and abroad, said Harold McGraw III, chairman of Business Roundtable and CEO of The McGraw-Hill Companies, in a conference call.
But McGraw said the latest actions taken by the government -- including the Obama Administration’s stimulus and the trillion-dollar plan developed at G-20 -- are encouraging.
“While recently implemented policies need time to make an impact, they’ve already begun to restore confidence in our market, which is a critical first step,” he said during the call.
The latest survey also shows dimming hope about GDP, which CEOs expect will decline by 1.9% in 2009. Last quarter, they expected GDP to remain flat.
In his conference call, McGraw said that the survey was conducted during a week when the economic news was “very disappointing” and that he’s encouraged by the latest retail sales and housing reports.
“We’ll start to see the pace of decline slowing down and could see positive growth in the fourth quarter,” he said. “I think what we’re seeing now is a move toward a steady improvement.”
Unemployment, which CEOs predict will increase, is something that McGraw said needs to be kept in perspective, given its nature as a lagging indicator.
“I think these are going to be our darkest hours, and I do think we’re going to start to see improvement from here,” he said.
