Survey Says CEO Outlook Improves

L.A. Times Archives

Dec. 15, 2005 12 AM PT

From Reuters

CHICAGO —

Chief executives expect the U.S. economy to show strength in 2006, as strong consumer and corporate spending and increased productivity offset rising healthcare and energy costs, according to a quarterly survey released by the Business Roundtable on Wednesday.

The survey of Roundtable members -- CEOs from large U.S. companies -- found the overall CEO economic outlook index increased to 101.4 from 88.2 in September. Any number higher than 50 signifies economic expansion.

It was the second-highest level in the survey’s three-year history, trailing only the 104.4 recorded in the first quarter of 2005.

CEOs expect overall U.S. economic growth of 3.3% in 2006, compared with a projected 3.4% to 3.5% this year.

“This is a healthy rate of growth. So 3.3% into 2006 ... represents a continuing strong economy,” Hank McKinnell, chairman of the Business Roundtable and CEO of drug maker Pfizer Inc., said on a conference call.

“The survey suggests that CEO confidence has rebounded despite persistently high oil prices, devastating natural catastrophes worldwide and a continuing volatile geopolitical environment,” he added.

The economy is being driven by strong consumer spending, as well as strong capital spending by companies and continued productivity gains, McKinnell said.

The survey also found that 87% of CEOs expect their sales to increase over the next six months, up from 74% in the last survey conducted after Hurricane Katrina hit the Gulf Coast region.

It found 56% expect to raise capital spending, up from 40% in September, according to the survey. Another 40% see no change.

It was the second-highest level ever for those who expect an increase, trailing the 60% rate in March, McKinnell said.

Forty percent of employers expect to increase employment, up from 33% three months earlier, the survey said. An additional 41% expect to make no change in employment.

The employment predictions were the strongest recorded this year and near the all-time high in the last two quarters of 2004, McKinnell said.