The U.S. economy’s outlook in the next six months appears fairly grim. That’s according to a quarterly survey by the Business Roundtable of 200 CEOs at the nation’s biggest companies.
The overall index plunged in the third quarter, posting the third sharpest drop ever in the survey’s decade-long history.
At the core? A pullback in both Europe and China and the uncertainty tied to the looming fiscal cliff in the United States.
Jim McNerney, Chairman of the Business Roundtable and CEO of Boeing (NYSE: BA), said on a conference call that businesses large and small are hungry for resolution on U.S. tax issues.
“Including auto tax increases, across the board spending cuts and the failure to raise the debt ceiling, the so-called fiscal cliff and the uncertainty attendant to it certainly is cold water on long-term planning,” he said.
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According to the survey, more CEOs plan to cut jobs than in the second quarter, and far fewer plan to beef up capital spending or expect sales to increase.
U.S. companies are sitting on piles of cash, but Cisco Systems (Nasdaq: CSCO) CEO, John Chambers, agrees D.C.’s inaction is holding them back.
“I think if you have predictability they’re ready to invest,” said Chambers. “Business leaders have to be risk takers by nature or they don’t survive. By the same token, if you don’t understand issues and what’s going to happen with tax policy, if you don’t understand issues about whether you can bring back your foreign earnings, if they don’t understand some of the fiscal cliff issues facing the consumer, they will watch.”
This survey doesn’t do President Obama any favors. Indeed, ahead of the first presidential debate, candidate Mitt Romney was quick to say that it shows Obama’s economic policies aren’t working.
But that’s oversimplifying, says Ethan Allen Interiors (NYSE: ETH) CEO, Farooq Kathwari.
“Our taxation in the United States, the highest from a corporate point of view, and I think that needs to be addressed; our problems of health costs, our problems ranging to from regulations but it’s not necessarily I think this president alone that can be blamed for it,” Kathwari said.
While resolution on the fiscal cliff may be months away, Kathwari expects that at least clarity on who’s president will cheer up his fellow CEOs.