CEO Economic Outlook Index Signals U.S. Economy Back on Track

Business Roundtable recently released its Q2 2021 CEO Economic Outlook Survey, a composite index of CEO plans for capital spending and employment and expectations for sales over the next six months. The overall CEO Economic Outlook Index increased in the second quarter to a value of 116, up nine points from Q1 2021, and only two points below the all-time high reached in Q1 2018 in the wake of pro-growth tax reform.

All three sub-indices increased in the second quarter as well, with the subindex measuring plans for hiring rising to historically high levels:

• Plans for hiring increased 15 points to a value of 103.

• Plans for capital investment increased six points to a value of 106.

• Expectations for sales increased six points to a value of 140. In their new estimate of 2021 U.S. GDP growth, CEOs project 5% growth for the year, a 1.3 percentage point increase from their estimate last quarter.

In a special question first posed in Q2 2020 and in each quarter since, 75 percent of CEOs say conditions for their companies have already recovered or will recover to pre-COVID-19 levels by the end of 2021-a two percentage point improvement from the prior quarter. Conversely, 25% of CEOs do not expect business conditions to recover until 2022 or later, down from 27% in the previous quarter, underscoring the continued challenges facing some industries as the global struggle against COVID-19 persists.

“CEO optimism near historic highs, particularly with record hiring plans, is a strong sign that we are climbing out of this unprecedented crisis,” said Business Roundtable Chairman Doug McMillon. “American innovation and the collaboration between the private sector and local, state and federal governments led to an extremely successful vaccine rollout here in the United States. By continuing to encourage more Americans to get vaccinated, we can ensure a continued safe reopening in the short term, and a stronger and more equitable economy in the long term.”

“This CEO optimism is welcome news-and we need to harness it to ensure U.S. economic recovery continues,” said Business Roundtable President and CEO Joshua Bolten.

“We can build on this momentum and sustain economic growth for decades to come by passing a bipartisan bill to upgrade the nation’s infrastructure- highways, water systems, energy and communications-and forgoing harmful tax increases on U.S. job creators that would hinder America’s economic recovery.”

Business Roundtable Tax and Fiscal Policy Committee Chair Gregory Hayes added, “As a separate survey of our members found, proposals to increase corporate tax rates would have significant adverse effects on hiring and investment plans and would be counterproductive to the goal of greater economic growth and opportunity for all Americans. We urge policymakers to seize the opportunity at hand and compromise on a bipartisan infrastructure package for the benefit of American workers and families.”

The Business Roundtable CEO Economic Outlook Survey, conducted quarterly since the fourth quarter of 2002, provides a forward-looking view of the economy by Business Roundtable member CEOs. The survey is designed to provide a picture of the future direction of the U.S. economy by asking CEOs to report their company’s expectations for sales and plans for capital spending and hiring over the next six months. The data are used to create the Business Roundtable CEO Economic Outlook Index and sub-indices for sales, capex and hiring. These indices are diffusion indices that range between -50 and 150 -- where readings at 50 or above indicate economic expansion, and readings below 50 indicate economic contraction. A diffusion index is defined as the percentage of respondents who report that a measure will increase, minus the percentage who report that the measure will decrease. The diffusion indices here are then normalized by adding 50 to the result. The second-quarter survey was conducted between May 25 and June 9, 2021. Overall, 172 CEOs completed the survey. Results of this and all previous surveys are available at brt.org.