Market Insider

CEO optimism ebbs for first time in two years amid worries trade conflicts will hurt sales, drive up costs

Key Points
  • CEO optimism about hiring, spending and sales slipped from record levels in its first decline in two years, amid increased uncertainty about government policies, particularly trade.
  • According to the Business Roundtable's quarterly survey, CEOs plans for hiring, spending and their own sales growth are still robust, but their outlook fell slightly from the first quarter.
  • The CEOs were concerned about the Trump administration's approach to trade, and 95 percent see a risk that foreign retaliation could hurt U.S. exports, while 91 percent see risks that consumers will be impacted by higher costs of imports.
President Donald Trump
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CEO optimism about hiring, capital investment and sales growth fell slightly in the second quarter from record levels, marking the first decline in two years amid concerns that trade conflicts could drive up costs for consumers and business.

According to the latest quarterly Business Roundtable CEO Economic Outlook Survey, the CEO Economic Outlook Index slipped to 111.1 in the second quarter, down from a record 118.6 in the first quarter, the first decline since before President Donald Trump was elected president.

The index is a composite of CEO expectations for sales, hiring and capital spending plans over the next six months. The index is still well above its historical average of 81.2 for a sixth straight quarter. But CEO expectations in each of the three categories fell slightly.

The survey of 132 CEOs specifically included a trade-related question, and it found CEOs are concerned about the Trump administration's approach to international trade issues. Ninety-five percent of the CEOs said there's a moderate or serious risk that foreign trade retaliation could lead to lower U.S. exports, while 91 percent said higher costs of imports for consumers was a moderate or serious risk.

Fifty-eight percent see a moderate risk of lower U.S. economic growth as a result of Trump's trade approach, while 41 percent see a serious risk of lower growth. The majority expect input costs for businesses to rise, with 47 percent seeing a serious risk of higher costs and 43 percent seeing a moderate risk.

Source: Business Roundtable

Expectations for hiring fell slightly to 95.5, off 3 points from the first quarter, while plans for capital investment dropped to 107.6, off 7.8 points. Sales expectations were down 11.6 points from the first quarter, to 130.3.

J. P. Morgan Chase CEO Jamie Dimon, who chairs the Business Roundtable, said "business leaders are expressing historically strong optimism about our economy — and that's delivering more jobs and increased wages to millions of Americans."

"To sustain this momentum, we need to ensure that we have competitive trade policies in place to provide the certainty necessary to deliver sustainable economic growth to create more opportunities for workers and families nationwide," he said.