U.S. CEOs voice less confidence in the economy, concern about trade issues

Executive looking out window
The U.S. economy may see some slowing down, a CEO report says. (Getty/Tom Merton)

The optimistic way CEOs have been looking at the economy slipped for the first time in almost two years amid concerns about U.S. government policies, especially trade.

The second-quarter CEO Economic Outlook Index, issued this week by the Business Roundtable, declined to 111.1, from its record 118.6 in the first quarter. The index is a composite of CEO expectations for sales and plans for capital spending and hiring over the next 6 months.

The index remained ahead of its historical average of 81.2 for a sixth straight quarter, although CEO outlooks for its three main categories declined a bit.

The latest index also showed a CEO projection of 2.7% U.S. GDP growth in 2018, a small decrease from the 2.8% estimate last quarter.

In a special trade-related question for the second quarter, CEOs had significant concerns about the administration’s approach to international trade issues. Almost all (95%) of respondents said, “foreign trade retaliation leading to lower U.S. exports” was a moderate or serious risk.

Some 91% said that “higher costs of imports for U.S. consumers” was a moderate or serious risk, 90% indicated “higher input costs for U.S. businesses” was a moderate or serious risk, and 89% said that “lower U.S. economic growth” was a moderate or serious risk.

"It doesn't help U.S. jobs," Howard Schultz, the outgoing executive chairman of Starbucks, told CNN last week when speaking about trade skirmishes.

"Every time that we have had a conflict of trade and there have been trade wars," Schultz said. “It has resulted in a downturn of the economy of the United States."

The Economic Outlook Index also showed CEO plans for hiring dipped slightly to 95.5, down 3 points from the previous quarter. Plans for capital investment fell to 107.6, a decrease of 7.8 points from the first quarter. Expectations for sales fell to 130.3, a decrease of 11.6 points from last quarter.

Looked at another way, 84% of CEOs saw an increase in sales in the next six months, compared with 93% in first quarter. Fifty-eight percent expect their U.S. employment to rise, compared with 61% early in the year. And 61% see capital spending rising compared with 68% in the first quarter.

The Business Roundtable said overall, the showing “signals a continued positive direction for the U.S. economy.”

Jamie Dimon, CEO of JPMorgan Chase and chairman of the Business Roundtable, said in a statement: “For the sixth straight quarter, business leaders are expressing historically strong optimism about our economy—and that’s delivering more jobs and increased wages to millions of Americans. To sustain this momentum, we need to ensure that we have competitive trade policies in place to provide the certainty necessary to deliver sustainable economic growth to create more opportunities for workers and families nationwide.”

Joshua Bolten, Business Roundtable CEO, added, “We continue to see strong CEO plans in the second quarter of 2018, but uncertainties about trade policy are a growing weight on economic progress—especially amid escalating trade tensions. America’s current and future economic vitality depends on productive talks with China and a successful modernization of NAFTA.” 

Edward Nathan Page, president of Relation Insurance Services, said in an email correspondence the very good times the U.S. has enjoyed are going to see some slowing down.

“I expect to see a robust economy continuing through 2018 and 2019,” Page said. “At the end of 2019, the beginning of 2020, a number of micro factors will likely impact the economic environment. A likely explosion in the national debt, increased costs from tariffs, combined with deductions in business interest rate deductions, will likely pose significant headwinds. Our clients and partners are gearing up for what they see as a more challenging environment about 18 months out.”