The economic expectations of leading U.S. chief executives have dropped to the lowest level in three years amid concerns about taxes and the global economy, according to survey results released Tuesday.
Reduced expectations for sales and capital spending over the next six months pushed down the quarterly economic outlook index from the Business Roundtable, a trade association of CEOs of the largest U.S. corporations.
It was the third straight decline for the index, which fell to 67.5 in the fourth quarter from 74.1 in the previous quarter, the group said.
The index's long-term average is 80.1 within its range of 150 to negative 50. It dropped to negative 0.5 at its low during the Great Recession and has reached as high as 113 during the recovery.
"Lower expectations for sales and investment reflect CEOs' ongoing caution about the near-term prospects for U.S. economic growth," said AT&T Inc. Chief Executive Randall Stephenson, the group's chairman.
Still, short-term hiring plans held steady in this quarter's survey, with 35% of respondents expecting to increase their company's workforce over the next six months.
The more pessimistic overall outlook was caused by several factors, Stephenson said.
The Paris terrorist attacks could make consumers and businesses more cautious. And exports have been hurt by the slowing global economy and strong U.S. dollar, he said.
Meanwhile, CEOs are concerned that Congress has yet to extend some key expiring tax provisions, including one for research-and-development expenses, while broader efforts to overhaul the corporate tax code appear stalled.
The U.S. has the highest corporate tax rate of the major developed countries that make up the Organization for Economic Development and Cooperation.
That 35% rate is pushing U.S. firms such as Pfizer Inc., to try to lower their taxes through a tactic known as inversion that shifts their corporate headquarters abroad, Stephenson said.
"The Pfizer situation is just a continued reinforcement of how uncompetitive our tax system is here in the United States," Stephenson said.
"We can't do anything about China's economy. We really can't do anything about foreign currency, but we can do something about a tax code that is the least competitive in the OECD," he said.
A tax overhaul that lowers the U.S. corporate rate is a top priority of the Business Roundtable. And though there is bipartisan support for lowering the rate in combination with the elimination of some corporate tax breaks, legislation is unlikely to advance until after next year's presidential election.
With CEOs concerned about taxes and increased government regulation, just 30% of the survey respondents said they planned to boost capital spending over the next six months. That was down from 41% in the third quarter.
About 27% said they planned to decrease capital spending, compared with 20% in the third quarter.
"To see that kind of sharp drop in plans for capital investment is alarming," Stephenson said.
Sales expectations slipped this quarter as well, with 60% of respondents anticipating an increase over the next six months. That was down from 63% in the third quarter.