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CEOs now see gloomy third quarter, drop growth expectations
Question of the Day
Four major business groups see gloomy times ahead for the job market and the economy, according to a string of separate surveys and polls released this week that cast fresh doubt on hopes that the economic recovery may have turned the corner.
Top executives and small-business owners polled by the Business Roundtable, the National Association of Manufacturers, the National Federation of Independent Business, and chief financial officers surveyed by the management firm Deloitte pointed to uncertainty posed by new regulations, shaky demand overseas and the “fiscal cliff” facing the federal government as prime reasons keeping companies from investing and hiring at a faster pace.
The Business Roundtable, an association of CEOs from some of the nation’s top companies, on Wednesday dropped its growth expectations for the third quarter to the lowest level since the middle of the Great Recession. The trade group lowered projections for sales, capital spending and hiring in its latest CEO Economic Outlook Survey to their lowest levels since 2009.
The report was released on the same day as the chief financial officer survey from Deloitte, which found that CFOs also are increasingly pessimistic about the futures of their companies.
Those reports follow by a day a joint survey from the National Association of Manufacturers (NAM) and National Federation of Independent Business (NFIB), which found a majority of companies believe the economy is worse now than it was three years ago, shortly after President Obama took office.
The Romney camp seized on the cluster of surveys to blame Mr. Obama for rising business pessimism.
“For nearly four years, job creators have struggled in the Obama economy,” said Ryan Williams, a Romney campaign spokesman. “Business leaders have the gloomiest outlook in three years, and the president’s failed economic policies of higher taxes and more regulations will only make things worse. Mitt Romney understands what it takes to start and grow a business — and, as president, will implement pro-growth policies to create 12 million new jobs and get small-business owners back on their feet.”
The White House did not respond directly to a request for comment, but earlier in the day, Obama campaign spokeswoman Jen Psaki talked to reporters who were traveling with the president in Ohio. She defended Mr. Obama’s economic record and said he has the most credible plan to lower deficits, which will help the economy.
“President Obama is the only one who has a comprehensive, balanced approach to bringing the deficit down,” she said. “When your approach is, like Gov. Romney’s is, [when] your first offering is a $5 trillion tax cut for millionaires and billionaires, it’s hard to take your plans for deficit reduction seriously.”
The gloomy economic outlook for businesses comes on the heels of more hopeful signs this week for the economy on both consumer sentiment and housing prices. The Conference Board on Tuesday reported that its Consumer Confidence Index surged nearly 10 points to 70.1, while the S&P/Case-Shiller Home Price Index rose 1.6 percent last month, and is up a total of 8 percent since the beginning of the year. But as far as businesses are concerned, the uncertainty created by the fiscal cliff and mounting regulations outpaces any gains in consumer confidence.
The fiscal cliff — an end-of-the-year deadline for a budget deal on Capitol Hill to avoid deep automatic spending cuts and tax increases — has businesses putting off hiring and spending decisions, because they don’t know what to expect in the coming months and years, said Jim McNerney, the CEO of Boeing Co. who also heads the Business Roundtable.
“This complete Mexican standoff that we have now is not getting us anywhere,” he told reporters.
Business Roundtable President John Engler called the impending budget disaster a “fiscal Everest.”
“This is something that urgently needs to be addressed,” Mr. Engler said. “This is the same problem the NFL is having. The players aren’t quite clear how to play the game, because the refereeing is so bad.”
Mr. Engler urged lawmakers to take action now to avoid the automatic spending cuts and tax increases set to kick in if no deal is made.
“We can lead, but you can’t lead by not making decisions,” he said.
Business leaders also complained about what they said were heavy-handed and misguided regulations that have hurt growth and curbed the appetites of companies to hire and invest.
Fifty-eight percent of the CEOs who responded to the Business Roundtable survey expect sales to increase in the next six months, down from 75 percent last quarter, while the number of CEOs who expect a decline in sales nearly tripled to 15 percent, largely because of weaker demand in Europe and China.
Companies also are slowing capital spending and hiring because of uncertainties in the U.S. tax and regulatory environments. About 30 percent expect to increase spending over the next two quarters, down from 43 percent last quarter, while 19 percent plan to cut back on spending, up from 12 percent.
About 29 percent expect to boost hiring, down from 36 percent, while 34 percent expect to make layoffs or other declines in employment, up from 20 percent.
Meanwhile, the CFO Signals Survey found that 47 percent of chief financial officers are more pessimistic about the performances of their companies this quarter. The survey said the results are the “most somber year-over-year expectations” in the history of the study.
Respondents cited government policies, such as the federal government’s budget impasse, taxes and regulatory changes, as their biggest concerns.
In the NAM and NFIB poll, 55 percent of small-business owners and manufacturers say that, given the current economic climate, they would not start a business today. Two-thirds of respondents said they found it hard to expand their business or hire new workers, because of economic uncertainty.
Respondents said the government has been more of a “barrier rather than a help”: More than two-thirds blame regulatory policies for hurting small businesses and manufacturers, while 55 percent are concerned that the regulatory environment is getting worse.
Twenty-seven percent say the heavy regulatory environment could lead to companies moving overseas, rising consumer prices (24 percent) and job loss (23 percent).
On the other hand, these business leaders believe that emerging rivals such as China and India are better about supporting their small businesses and manufacturers. In fact, 62 percent say U.S. laws, regulations, rules, taxes and fees are harder to deal with than the burdens faced by foreign competitors.
“Manufacturers have told policymakers in Washington time and again that uncertainty and a negative business environment is turning the American Dream into a nightmare,” NAM President and CEO Jay Timmons said in a statement. “There is far too much uncertainty, too many burdensome regulations and too few policymakers willing to put aside their egos and fulfill their responsibilities to the American people.”
© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.
About the Author
Tim Devaney is a national reporter who covers business and international trade for The Washington Times. Previously, he worked for the Detroit News, Grand Rapids Press, Portland Press Herald and Bangor Daily News. Tim can be reached at email@example.com.
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