CEOs of US companies are unimpressed at the rate the economy is growing. The disinterest is now threatening to carry over into their companies' employment and investment cycle. These are the findings of Business Roundtable's latest Economic Outlook survey. Business Roundtable, named around the proverbial round table of King Aurther, is a group of CEOs from the biggest US companies.
The CEOs may change their perception, but it will depend on further tax reforms and progress on trade agreements like the TPP (Trans-Pacific Partnership) and TTIP (Transatlantic Trade and Investment Partnership). Other reasons that have dimmed the CEOs' enthusiasm are labor disputes, low oil prices, a strong dollar and slow recovery from bad weather.
A survey of the top 128 CEOs in the country found that on an average, they are expecting a GDP growth rate of 2.5 % in 2015. As a result, just 34% of US CEOs are planning to take on more US employees in the second quarter, compared to 40% in the first quarter. About 70% of the CEOs expect that sales will increase, against 80% who thought so, last quarter. Just 35% of them will invest in capital building, against 45% in the last quarter.
Business Roundtable calls for bipartisan support for trade promotion and tax
Chairman and CEO of AT&T and a member of the Roundtable, Randall Stephenson said the results mean that the US economy is operating at a lower level than what it is capable of.
The House of Representatives is currently deliberating on whether to give the green light to the Trade Promotion Authority (TPA). If and when the TPA is set up, President Obama will get fast track authority to negotiate the TTP and TTIP. The TTP covers 40% of the global economy, including many countries in South East Asia. The Business Roundtable has already expressed its support for such trade agreements, saying that they will boost growth at home. A majority of the Roundtable executives feel that the enhanced access to global markets facilitated by the trade agreements will also help US companies add more US workers.
Meanwhile, debates over tax reform are stuck. Instead of cutting the corporate tax rate, Congress has passed many piecemeal reforms like 'tax extenders' (tax deductions for using renewable energy, tax deductions for research and tax credits). Stephenson said that not passing tax reforms is a mistake on the part of the Congress, because the tax structure is quite uncompetitive at present and does not support investments at all.