The economic outlook among CEOs remained strong in the third quarter of 2018, according to the results of the latest Business Roundtable CEO Economic Outlook Survey.
However, the Q3 CEO Economic Outlook Index — a composite of CEO expectations for sales and plans for capital spending and hiring over the next six months — decreased slightly as business leaders experience uncertainty and negative effects from the Trump administration’s actions on trade.
This quarter’s index was 109.3, a decline of 1.8 points from 111.1 in the second quarter of 2018. This is the seventh straight quarter where the index has exceeded its historical average, signaling a continued positive direction for the U.S. economy.
According to Joshua Bolten, Business Roundtable president and CEO, this quarter’s survey results “signals a good strong direction for the U.S. economy.” In a webcast on Monday, Bolten also said that he sees how the “increased uncertainty around trade policies is having a negative effect.”
“The administration’s regulatory agenda and especially tax reform have created substantial tailwinds for our companies’ job creation and capital investment,” Bolten said. “However, in recent months, these positive trends have now been running up against what looks to be substantial and growing headwinds from the administration’s trade policy agenda.”
To see how trade policy decisions are influencing CEO and company decisions, Roundtable CEOs were asked a special question regarding the effect of U.S. trade policy on capital investment in the Q3 survey.
Nearly two-thirds of responding CEOs said that recently enacted tariffs — along with other changes to trade policy and uncertainty about future trade actions — will have a moderate or significant negative effect on their companies’ capital investment decisions over the next six months.
Bolten added that “just 2%” saw a moderate or significant positive effect on capital spending as a result of trade policy.
“Contrary to the assertion that new tariffs and trade restrictions are making our economy stronger, almost none of our companies see it as a positive,” Bolten said during the webcast.
According to Bolten, the negative effects on capital investment have important implications “not only for our member companies but for their suppliers as well, many of which are small- and medium-size businesses who will be squeezed by decreased business investment and equipment and facilities,” he said.