CEOs Foresee Further Economic Contraction

Next six months to see declining sales and dwindling employment figures

April 10 2009 by Fayazuddin A. Shirazi


Chief Executives at top U.S. companies are projecting a very grim economic outlook for the next six months with majority of them predicting declining sales and decreasing employment levels.

According to the Business Roundtable survey, majority of the polled CEOs believed sales would drastically come down alongside an increased risk of surging unemployment levels.

The Business Roundtable CEO Economic Outlook Index, a combination of responses on CEO projections for sales, capital spending and unemployment in the next six months, revealed that 67 percent of the surveyed CEOs anticipated a decrease in the expected sales, 24 percent believed sales would increase, while 9 percent said there wouldn’t be any change; which is an indication of the persistent negative CEO sentiment.

Commenting on how to revive the ailing economy, Business Roundtable Chairman, Harold McGraw III who is also the President and CEO of The McGraw-Hill Companies, said that by boosting consumer confidence and demand, faith in the slumping economy can be restored.

“Improving consumer confidence and demand, both in the United States and abroad, is the key to jump-starting the economy,” he said. “Fortunately, both U.S. and foreign governments have recognized this need and taken significant steps to spark demand. And while recently implemented Administration policies will take time to have an impact, they already have begun to restore confidence in our markets, which is a critical first step.”

In a news release, Business Roundtable, an association of CEOs of leading corporations with more than $5 trillion in annual revenues, said that CEO sentiment is persistently going negative with the member CEOs estimating a decline in the real GDP for 2009. “In terms of the overall U.S. economy, member CEOs estimate real GDP will decline by 1.9 percent in 2009, down from the CEOs’ zero percent estimates in the fourth quarter of 2008,” the release said.

Additionally, the Business Roundtable estimates show that the Economic Outlook Index contracted to negative 5.0 in the first quarter of 2009. While lower than the 16.5 index reading in the fourth quarter of 2008, the decline was less dramatic than in the previous quarter when it had fallen from 78.8 in the third quarter of 2008, the release said. The index is centered on 50, and results can range from negative 50 to positive 150. An index reading of 50 or lower is consistent with overall economic contraction and a reading of 50 or higher is consistent with expansion.

“Despite the considerable challenges facing our country, by working together, we can turn our economy around, put Americans back to work and preserve our position as the world’s economic leader,” added McGraw. “We stand ready to work with President Obama and Congress to ensure sustained, long-term economic growth for our workers, communities and companies.”

The quarterly survey completed between March 16 and March 27 provides a forward-looking view of the economic assumptions and outlooks of Business Roundtable member CEOs.