CEO Economic Outlook Shows Modest Improvement

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CEO economic expectations for sales, capital expenditures and hiring have moved modestly upward, but GDP growth expectations have dipped, indicating the United States still has far to go to achieve sustained growth, according to the Business Roundtable second quarter 2016 CEO Economic Outlook Survey, released today.

The Business Roundtable CEO Economic Outlook Index — a composite of CEO projections for sales and plans for capital spending and hiring over the next six months — increased modestly from 69.4 in the first quarter of 2016 to 73.5 in the second quarter. The Index remains below its historical average of 79.8 but well above 50, indicating continued economic expansion.

CEO expectations for sales over the next six months improved by 0.8 points, while plans for capital expenditures moved up by 8.1 points, relative to last quarter. Expectations for hiring increased by 3.5 points from last quarter.

However, in their third estimate of real GDP growth for 2016, CEOs expect 2.1% growth, down from their 2.2% estimate in the first quarter of 2016.

“Increased plans for near-term sales, investment and hiring indicates modest economic improvement,” said Doug Oberhelman, Chairman & CEO of Caterpillar Inc., and Chairman of Business Roundtable. “But the CEO estimate for barely more than 2 percent GDP growth this year points to an economy that continues to perform below its potential. Unfortunately, it’s more of the same ‘one step forward, one step back’ we’ve been experiencing for a number of years now. We need sustained, healthy growth, which would be aided by enactment of pro-growth policies, such as ratifying the Trans-Pacific Partnership and updating our outdated tax system. Absent that, the U.S. economy will continue to be stuck in the slow lane.”

Second Quarter 2016 Business Roundtable CEO Economic Outlook Index

The Business Roundtable CEO Economic Outlook Index — a composite index of CEO plans for the next six months of sales, capital spending and employment—increased from 69.4 in the first quarter of 2016 to 73.5 in the second quarter of 2016. The long-term average of the Index is 79.8.

About the Business Roundtable CEO Economic Outlook Survey

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.