March 3, 2005 -- America's CEOs looked into their corporate crystal balls during February and saw something they liked -- vigorous growth.
According to the Business Roundtable CEO Economic Outlook Survey, which polled 118 CEOs of America's 160 largest companies, more than 97% felt their capital spending was going to increase (60%) or stay the same (37%).
"This is a very strong capital spending report," Hank McKinnell, chairman of the Roundtable and chairman as well as CEO of Pfizer Inc., said. "These extremely robust figures in [capital expenditures] '¶ are really the best predictors of future economic growth."
March's survey returned a record-high 104.4 rating on the CEO Economic Outlook Index -- 10 points above last year's index (94.3). This index is a diffusion index, meaning that any number above 50 indicates growth and vice versa. The survey also revealed that 99% of the CEOs surveyed felt their company's sales would increase or stay the same. The number of CEOs anticipating growth in employment saw a 4% decrease on this survey versus the last -- down to 36% from 40% respectively. But, McKinnell adds, this is mostly due to increased productivity -- which is at it's strongest it's been in 20 years.
The brightest aspect of the survey, which has been conducted quarterly since 2002, is what McKinnell hinted to earlier -- strong capital spending.
"Sixty percent of our companies are planning on increasing spending on plant equipment, processes and technology," he added. "These investments will build capacity and technological capabilities into the future."
McKinnell did give a glimpse into some aspects that may be siphoning growth domestically. Ever-increasing oil prices as well as contracting economies in Japan and Germany could have a negative effect on these predictions. However, he pointed to the big-picture prediction of 3.4% GDP growth for '05 despite the GDP growth in 2004, which was a robust 4.4 as indicators of a bright future ahead.
"I believe that number [predicted GDP growth] has been suppressed by the high-level of oil prices," McKinnell said. "This is a healthy rate of [GDP] growth given the fact that for the past 35 years GDP growth averaged 3.1%."