CEO Survey: GDP Growth Below 35 Year Average in 1H 07; Top 6 Cost Pressures

Business Roundtable’s 4th quarter "CEO Economic Outlook Index", which indicates how CEOs believe the economy will perform in the months ahead, stands at 81.9 – virtually unchanged from 82.4 in the third quarter. 

Economic Outlook Index combines the responses on projected sales, capital spending and employment into an overall index that shows how the CEOs believe the U.S. economy will perform in the six months ahead. Index value above 50 is expansion and anything below 50 is contraction.

On overall economic growth, CEOs are assuming 2.8% GDP growth in 2007, down two-tenths of a percentage point over the third quarter Roundtable survey projection and slightly below the historical average of 3.1% recorded over the past 35 years.

“This survey shows that CEOs are expecting a period of slower growth compared with the first half of 2006, with no major up or down movement in the economy during the first half of 2007,” said Harold McGraw III, Chairman of Business Roundtable and Chairman, President and CEO of The McGraw-Hill Companies.

The survey’s key findings for the first six months of 2007 include:

Business Roundtable
CEO Economic Outlook Index - Q4 2006
Increase No Change Decrease
How do you expect your company’s sales to change in the next six months?
69% 18% 14%
How do you expect your company’s U.S. capital spending to change in the next six months?
39% 48% 13%
How do you expect your company’s U.S. employment to change in the next six months?
37% 40% 23%
Note: Totals may not equal 100 due to rounding.

Top Cost Pressure

For the fourth consecutive year, CEOs overwhelmingly cited health care costs as the greatest cost pressure facing their businesses (51%), three times the proportion citing the next greatest pressure, energy costs (16%). 

Top cost pressures cited by companies in this year’s survey were:

  1. health care costs (51%)
  2. energy Costs (16%)
  3. material costs (14%)
  4. litigation costs (10%)
  5. labor costs (7%)
  6. pensions (2%)

The Roundtable’s CEO Economic Outlook Survey, which has been conducted quarterly since the fourth quarter of 2002, provides a forward-looking view of the economic assumptions and outlooks of Roundtable companies.

The survey was completed between November 13 and 30 by 124 of the Roundtable’s 160 member companies. The percentages in some categories may not add up to 100 because of rounding. Results of all surveys can be found at  

Business Roundtable is an association of chief executive officers of leading corporations with a combined workforce of more than 10 million employees and $4.5 trillion in annual revenues.

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