The Business Roundtable CEO Economic Outlook Index is based on a survey — conducted quarterly since the fourth quarter of 2002 — of our member CEOs’ plans for hiring and capital spending, and their expectations for sales, over the next six months. Taking these factors together, the survey signals the direction of the U.S. economy.
Washington, D.C. – Leaders of America’s top companies expect some softening of U.S. economic conditions in the next six months, according to Business Roundtable’s third quarter 2007 CEO Economic Outlook Survey, released today.
The CEO Economic Outlook Index, which indicates how CEOs believe the economy will perform in the six months ahead, declined moderately to 77.4, a four and a half point dip from 81.9 in the second quarter of 2007.
“This quarter’s survey shows that CEOs see a modest decline in economic conditions in the coming months,” said Harold McGraw III, chairman of Business Roundtable and chairman, president and CEO of The McGraw-Hill Companies. “While the latest results continue a pattern of gradual decline in expectations since the beginning of the year, America’s business leaders remain confident in the overall business environment.”
When asked if recent credit market turmoil would impact business prospects, 60 percent of CEOs said they do not expect substantial effects; while nearly 40 percent reported that they do. Of the 40 percent of CEOs who do expect effects, roughly 62 percent believe that the main channel of impact will be through a weaker overall U.S. economy. Twenty-nine percent worry that it will cause their customers to retrench; five percent worry that it will increase their cost of capital and five percent worry that it will negatively affect the global economy.
Business Roundtable, an association of chief executive officers of leading corporations, represents a combined workforce of more than 10 million employees and $4.5 trillion in annual revenues.
The survey’s key findings for the next six months include:
CEO Economic Outlook Index for Third Quarter
On overall economic growth, CEOs are now assuming 2.4 percent GDP growth in 2007, a view that is slightly less than the previous survey, which assumed 2.6 percent GDP growth.
The CEO Economic Outlook Index combines the responses on projected sales, capital spending and employment into an overall index that shows how the CEOs believe the U.S. economy will perform in the six months ahead. It is a diffusion index centered on 50, which means anything above 50 is expansion and anything below 50 is contraction.
“While this third quarter index result of 77.4 represents a modest downtick from the close index range of 81 to 85 from the past four quarters, it remains steadily above the 50-68 range observed in late 2002 and early 2003, as the economy recovered from the last recession,” concluded McGraw.
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.
The survey was completed between August 20 and September 5 by 113 of the Roundtable’s 159 member companies. The percentages in some categories may not add up to 100 due to rounding.