Business executives expect sales to decline in the next six months, and as a result foresee making fewer capital expenditures and employing fewer workers, according to a survey released yesterday.
"Improving consumer confidence and demand, both in the United States and abroad, is the key to jump-starting the economy," said Harold McGraw 3d, chairman of Business Roundtable, which released the survey. "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."
The chief executive officers expect real gross domestic product to drop 1.9% this year, compared to expectations of a flat reading in the prior survey.
The CEO Economic Outlook Index contracted to negative 5.0 in the first quarter of 2009 from 16.5 in the fourth quarter of 2008. In the third quarter of 2008, the index was 78.8. The index is a composite diffusion index that combines member CEO projections for sales, capital spending, and employment in the six months ahead.
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.