Survey Shows Pandemic Lowered CEO Expectations
Business Roundtable, a nonprofit organization that draws its membership from the CEOs of major U.S. companies, has released its second quarter 2020 CEO Economic Outlook Survey, a composite index of CEOs’ plans for capital spending and hiring, and expectations for sales over the next six months. This quarter, the overall Index was 34.3, a decrease of 38.4 points compared to Q1 2020 and the lowest reading of the Index since second quarter 2009. However, it remains above the record low of negative five reached in first quarter 2009.
Business Roundtable says that the new value of 34.3 signals that an economic contraction is underway, which is consistent with the National Bureau of Economic Research’s recent determination that the U.S. economy has entered into a recession. It reflects the disruptions to business caused by the COVID-19 virus and the global pandemic, and shows the effects of business and factory shutdowns, especially in March and April.
The second-quarter survey questioned CEOs on the actions their companies were taking to keep employees and customers safe. It found that 100 percent of them have adopted or plan to adopt physical distancing measures at their facilities, and nearly all CEOs have adopted or plan to adopt routine cleaning and disinfecting, are promoting face coverings, are actively encouraging sick employees to stay home and are protecting vulnerable employees through supportive policies and practices. More than two-thirds of CEOs surveyed have expanded wellness support and behavioral health services for their employees, and 95 percent of CEOs have expanded flexible work arrangements within their companies.
Additionally, when asked when their company would recover to pre-COVID levels, most expect business conditions to recover by the end of 2021. However, 27 percent do not expect recovery for their companies until after 2021.
“Our battle against COVID-19 is far from over, and our top priority remains the health and safety of our employees, customers and communities we serve,” says Doug McMillon, chairman and CEO of Walmart and chairman of Business Roundtable. “We urge lawmakers at the federal, state and local levels to coordinate as much as possible to control further spread of this virus. Business Roundtable will continue working with lawmakers and public health officials to ensure all Americans, especially those most vulnerable, benefit from policies that will boost economic recovery, while prioritizing public safety.”
Joshua Bolten, president and CEO of Business Roundtable, adds, “The outlook of Business Roundtable CEOs reflects the reality of current economic conditions. We appreciate the actions taken by the Administration and Congress so far to help American workers, small businesses and communities, but there is much more to do. We encourage policymakers to work together on additional measures that will help bring a rapid end to this public health crisis and encourage economic recovery efforts as business operations resume. CEOs remain committed to promoting adherence to COVID-19 safety measures so that states can safely remain open for business.”
Survey results also show that CEOs’ plans for hiring decreased by 39.8 points to 26.3, 32.6 points below the sub-index’s historical average of 58.9. Their plans for capital investment decreased by 37.3 points to 25, 51.3 points below the sub-index’s historical average of 76.3, and their expectations for sales decreased by 38.4 points to 51.5, 60.6 points below the sub-index’s historical average of 112.1. In their estimate of 2020 U.S. GDP growth, CEOs projected a 3.8-percent contraction for the year, which dropped 5.8 percentage points from last quarter’s estimate of two-percent growth.