Despite a slight tempering from the first quarter, CEOs of some of the largest U.S. corporations continue to be optimistic about prospects for their companies and the economy.
Some 87% of the 135 CEOs surveyed say they expect their firm's sales to increase in the next six months, compared to 92% who projected higher sales in the first quarter. "As a result, more than half of our CEOs plan to increase both capital spending and U.S. hiring," Ivan Seidenberg, chairman of Business Roundtable (BRT) and chairman and CEO of Verizon Communications, commented.
BRT's Economic Outlook Survey Index, a composite of the sales, capital spending and employment measures, decreased slightly to 109.9 from 113 in the first quarter.
The executive group estimated that GDP for the U.S. will grow by 2.8% in 2011, just below the 2.9% estimate from the first quarter.
Capital Spending and Hiring
When asked in a press conference about higher projections for capital spending (61%) than employment (51%), Seidenberg said "capital spending usually precedes hiring. First you invest in plant and equipment, in expanded facilities. You do the work necessary to increase capacity and then you do the hiring." He said BRT members had been consistent in their outlook on hiring. In the broader economy, he added, there had been less job formation among small and medium-size businesses.
Seidenberg told reporters that CEOs expect there will be a "fundamental resolution" of the debt ceiling and spending talks now going on and that was built into the optimistic view of BRT members.
John Engler, the president of Business Roundtable, said there was "modest optimisim" that there would also be progress on pending free trade agreements and on regulatory reform. He said decisions such as the NLRB complaint against Boeing building a factory in South Carolina rather than add a production line in Washington "dims optimism and goes in the opposite direction."
But Seidenberg told reporters the basic message from the latest Business Roundtable survey is that CEOs are "anticipating a better second half in 2011."