Despite a slowdown in economic growth of 1.2 percent in the second quarter, continued risk of a weaker global economy, and the latest data indicating a sharp drop in private investment, U.S. CEOs are relatively positive about economic prospects.
Economic confidence from U.S.-based CEOs trails only their counterparts in Asia, which reported the most optimistic economic outlook in the world, according to the quarterly YPO Global Pulse survey conducted in July. Confidence rose 1.2 points in July, to 60.8, for the United States. It increased modestly around the world, rising 1.4 points.
That makes a streak of seven straight months of gradual improvements in global CEO confidence, a major about-face from global CEOs who came into 2016 with a largely pessimistic outlook.
The erosion of U.S. CEO confidence began in the second half of 2014 and continued through the early part of this year. The rise in the value of the dollar had caused U.S. exports to become more expensive for foreigners to purchase. As a result, exports declined 7.5 percent last year and the trade component subtracted 0.6 percent from GDP growth.
The modest gain in confidence appears to be a reflection of a slight drop in the value of the dollar, along with a significant drop in long-term interest rates triggered largely by the Brexit decision, and an apparent acceleration in the pace of economic activity. More specifically, the pace of economic activity in the United States has picked up from a tepid 1.1 percent rate in the first quarter to 2.5 percent or so in the second quarter, with the prospect of 2.5 percent growth continuing into the second half of the year.