CEO Economic Forecast Drops to 3-Year Low

By Douglas A. McIntyre Updated Jan 13, 4:38PM EST · Published Dec 1, 10:05AM EST

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CEO Economic Forecast Drops to 3-Year Low — © Thinkstock

CEOs of large American companies are becoming more pessimistic by the quarter. The Business Roundtable CEO Economic Outlook Index fell to 64.5 in the fourth quarter from 74.1 in the third quarter. It is another in a set of gloomy forecasts about both the U.S. and global economies.

The decline takes the index to the lowest level in three years, and it represents the third quarter of decline. The figure is calculated based on sales, hiring and capital spending forecasts for the next six months.

According to the fourth-quarter data:

For the first six months of 2016, CEO expectations for sales decreased by 3.2 points and their plans for capital expenditures decreased by 16.7 points. Hiring plans were essentially unchanged from last quarter when they declined by nearly 8 points.

The GDP forecast for 2016, the first by the group, was 2.6%. The group partially blamed public policy.

Randall Stephenson, Chairman of Business Roundtable, and Chairman and CEO of AT&T, said:

Lower expectations for sales and investment reflect CEOs’ ongoing caution about the near-term prospects for U.S. economic growth. Congress and the Administration need to work together to continue to fund the government, expand trade, agree on a long-term transportation infrastructure investment plan, reauthorize the U.S. Export-Import Bank and renew expired tax provisions.

If the forecast is correct, it will have a large effect on employment next year.

Methodology:

The Business Roundtable CEO Economic Outlook Survey, conducted quarterly since the fourth quarter of 2002, provides a forward-looking view of the economy by Business Roundtable member CEOs. The survey is designed to provide a picture of the future direction of the U.S. economy by asking CEOs to report their plans for their company’s sales, capex and employment in the next six months. The data are used to create the Business Roundtable CEO Economic Outlook Index and sub-indices for sales, capex and hiring expectations – diffusion indices that range between -50 and 150 – where readings at 50 or above indicate an economic expansion, and readings below 50 indicate an economic contraction. A diffusion index is defined as the percentage of respondents who report that a measure will increase, minus the percentage who report that the measure will decrease.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.