CEO Confidence Slips, Survey Shows, as Window for Tax Reform Seen Closing

CEO confidence in the economy has taken a slide, a new survey suggests, in a sign that business may be growing wary about the pace of policy reform in Washington.

The sharp increase in business confidence that accompanied Donald Trump’s election last year appeared to be holding broadly steady, according to a string of recent CEO polls by this publication and peer groups such as Business Roundtable.

Corporate chieftains, it seemed, were prepared to give the administration time to find consensus between Republican party lawmakers on key policy initiatives, such as tax and health care reform.

That patience may be starting to fray, at least according to an index of CEO confidence produced by nonprofit peer group The Conference Board. It slipped to 61 points from 68 points in the first quarter, on a global basis. In the U.S., the decline was more pronounced, with the index falling to 64 points from 74 points.

“We at FedEx, like many major U.S. companies, are concerned the window for tax reform is closing.”

To be sure, anything above 50 points reflects more positive than negative responses. And U.S. CEOs still remain more confident than their counterparts in Europe, China, Japan, India and Brazil.

Europe, however, is catching up, with CEO confidence levels there rising to 62 points in the second quarter from 60 points in the first. The improvement came after populist political movements where thwarted during elections in France and The Netherlands and general economic conditions improved throughout the region.

In the U.S., Chief Executive’s CEO Confidence Index for June fell back more modestly, to 7.03 out of 10, from 7.29 in May.

Business Roundtable, meanwhile, released a second-quarter CEO economic outlook index last month that actually improved slightly to 93.9 points from 93.3 in the first quarter, when it posted its biggest single rise in seven years.

The group, however, last week appeared to express frustration over the pace of tax policy reform by sending a joint letter with three other business groups to Congressional Republicans urging them to get cracking.

The letter came just days after the International Monetary Fund downgraded its growth forecasts for the U.S. economy, partly due to it removing the assumed stimulus from proposed tax cuts from its forecasts.

A frustrated FedEx CEO Fred Smith has been circulating a proposed alternative tax reform plan that drops a controversial “border-adjustment” levy proposed by some House Republicans. “We at FedEx, like many major U.S. companies, are concerned the window for tax reform is closing,” Smith told Bloomberg on June 27.

M&A markets, meanwhile. appear to have taken pause, while CEOs and boards await more policy certainty in Washington, according to a report released this week by Mergermarket.

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Ross Kelly
Ross Kelly is a London-based business journalist. He has been a staff correspondent or editor at The Wall Street Journal, Yahoo Finance and the Australian Associated Press.

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