US businesses ‘tapping the brake’ as uncertainty bites
Business confidence among top US chief executives fell for the sixth quarter in a row, as geopolitical uncertainty, the US-China trade war and slowing global economic growth continued to bite, according to a survey published on Wednesday.The Business Roundtable, a group of leading US chief executives from nearly 200 companies, said its economic outlook index fell 10.3 points in the third quarter, to a reading of 79.2. While that was significantly above the 50-point benchmark that indicates growth, all three components of the index — plans for hiring, plans for capital investment and expectations for sales — fell during the quarter.Joshua Bolten, president and chief executive of the Business Roundtable, said US businesses “now have their foot poised above the brake, and they’re tapping the brake periodically”.“Uncertainty is preventing the full potential of the economy from being unleashed, limiting growth and investment here in the US,” he said, adding that “opening markets and promoting rules-based trade remains vital to US economic prosperity”.“Congress and the [Trump] administration have the immediate opportunity to come together and provide stability and growth to our economy by enacting the US-Mexico-Canada Agreement.”Senior White House officials and Republican lawmakers are pushing for a quick vote on USMCA, which was struck last year as a replacement for the Clinton-era Nafta deal. However, many Democrats are sceptical of the agreement, and have demanded changes to its provisions on labour and environmental standards, drug prices and enforcement. The stand-off has cast a shadow over US president Donald Trump’s trade agenda as the trade war with China escalates. Mr Trump ramped up the trade war earlier this month with a fresh round of 15 per cent tariffs on a further $112bn of imports from China.Nearly all of the chief executives surveyed by the Business Roundtable reported no positive impact from US trade policy on their businesses in the past 12 months. More than half reported a “somewhat” or “very negative” impact on sales due to US trade actions and foreign retaliation, while one-third reported a negative impact on hiring, and one in four reported a negative effect on capital expenditures.
Wednesday, 18 September, 2019
Last month, the Business Roundtable made headlines when it published a new “statement of purpose” that rejected the longstanding notion of “shareholder primacy” in favour of a model that categorised shareholders as one of several stakeholders, alongside customers, workers, suppliers and communities.A separate Duke University survey of chief financial officers also released on Wednesday found that business optimism had dropped to its lowest level in three years, with more than half of the roughly 250 US CFOs it polled expecting the country to be in recession by the November 2020 US election.The Duke survey’s optimism index, which in past years has pointed to turns in hiring and economic growth, fell in the third quarter, with 55 per cent of finance chiefs saying they had become more pessimistic and just 12 per cent saying they were more optimistic. The outlook for business investment was notably weak, with finance chiefs predicting a less than 1 per cent increase in capital spending over the next 12 months, which would be the second-lowest quarterly growth rate since December 2009.Economic uncertainty is now US finance chiefs’ biggest concern, Duke found, surpassing the challenge of hiring and retaining qualified workers or concerns about regulation, data security or the rising cost of employee benefits.The FT is free to read today. You can share this article using the buttons at the top.