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BOOKKEEPING

Fearing Economic Uncertainty, Companies Put Spending Plans on Hold

In a shift from earlier this year, CEOs say they plan to invest less in new equipment and facilities.
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Gloomy economic reports in recent months have many small and midsize businesses rethinking spending plans, a pair of new surveys show.

Facing higher energy costs, a tighter labor market, and falling real-estate prices, the CEOs of small and midsize companies across the nation say they are less likely to invest in new plants and equipment now than at the start of the year, according to a survey released Wednesday by Vistage, an organization of over 13,000 business executives based in San Diego.

Of nearly 2,000 CEOs surveyed in August, 45% said they plan to increase investment spending this year, the lowest level recorded by the group in three years of quarterly surveys, Vistage said.

The survey results echo an earlier report by the Nation Federation of Independent Business, a Washington-based small-business advocacy group, which showed a similar decline in capital outlays in July for everything from new equipment, vehicles, expanded facilities, and furniture. 

Together, the reports paint a bleaker picture for small-business owners from the beginning of the year.

"We're seeing a significant shift from what had been a very bullish attitude toward one that is more measured," Dan Barnett, chief operating officer of Vistage, said in a statement. "When CEOs start talking about scaling back on growth plans, the economic mood is certainly darker than it was even just last quarter."

In recent months, government and private sector reports have shown declines in a range of economic trends, from sagging consumer confidence to a weakening housing market.

In August, the Conference Board's index of leading economic indicators fell for the fourth time in six months.

Among executives surveyed by Vistage, those who felt the economy would get worse this year outnumbered those that didn't by two-to-one.

For the third quarter, all six components of the group's small and midsize business confidence index were down, including the outlook on current and expected economic conditions, as well as employment, investments, revenue growth, and profits, the survey found.

Even CEOs that have continued spending are now evaluating their plans. Gorge Granados, who heads LatiNode, a Miami-based VoiP telecommunications firm that caters to Latin-American immigrants, recently completed a major acquisition and said sectors like his have largely been insulated from higher energy costs. However, he's keeping a close eye on potential weak spots in the economy.

"We've been growing for years, but the country isn't in as good a shape as before," Granados said. "If people start spending less in all areas, we'd have to look at cutting back our plans. That's just what you have to do." 

Last updated: Sep 6, 2006




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