America’s CEOs are getting gloomier

Photo: MGN

If the mindset of America’s business leaders is any indication, expect trouble ahead.

Fewer than half of CEOs, CFOs and other financial executives polled by the American Institute of CPAs (AICPA) say they’re optimistic about the U.S. economy over the next 12 months. That’s a sharp decline from the first quarter, when 68 percent expressed optimism for better economic times.

That number now stands at 48 percent, the first time the measure has dipped below 50 percent since early 2014, the survey said.

What’s troubling business leaders and finance executives? Worries over a global slowdown as well as regulatory issues in the U.S., the survey found. The downcast outlook comes on the heels of trouble in China, which last month devalued its currency and has been hit by wild swings in its stock market. Slowing economic growth in the world’s most populous country is also worrying U.S. investors.

Still, while China’s fortunes have some impact on the U.S. economy — American brands with operations there may take a hit as may commodity companies that sell raw materials to China — it might not be as large as some might fear. A 1 percent drop in China’s growth rate equates to only a 0.06 percent drop in U.S. GDP, for instance.

Closer to home, businesses in the U.S. are coping with a still-anemic recovery, with productivity continuing to lag (although that economic measure saw a rare 3.3 percent hike in the second quarter) and wages largely falling behind pre-recession gains.

“Because of economic uncertainty, we’re seeing a more cautious approach to hiring at most companies, particularly the largest ones,” said Arleen Thomas, senior vice president of management accounting and global markets at the AICPA, in a statement.

The silver lining, she added, is that 61 percent of executives at companies with less than $10 million in annual revenue — the smallest businesses that are included in the report — expect their businesses to expand this year, compared with just 47 percent in the previous quarter.

However, only 18 percent of business executives said they’re looking to hire, down from 21 percent in the previous quarter. While some executives said they actually need more staff, they’re simply hesitant to add to their companies’ payroll demands, the survey found.

There’s also some bad news for current employees: Executives are paring back plans for salary hikes. Employees are likely to see raises of only 1.3 percent, down from a five-year high of 2.1 percent at the end of 2014. This indicates that stagnant pay, which has been a hallmark of the post-recession years, is sticking around for a while. Economists consider wage growth of 3 percent to 4 percent as a more “normal” rate.

The survey was conducted in August and included 1,440 respondents. About two-thirds of them work at privately owned companies, while 20 percent work at publicly traded businesses and 17 percent are from the nonprofit sector.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s