According to a survey by the Business Roundtable, pessimism among executives at large U.S. businesses hit a three-year high in the third quarter because of global economic weakness and fear that Congress will be unable to resolve its standoff over tax increases and automatic spending cuts known as the "fiscal cliff."
“The fiscal cliff and the uncertainty attendant to it certainly is cold water on long-term planning,” said Boeing CEO James McNerney, who is also chairman of the Business Roundtable. “Until a path to a resolution of these issues is identified, business confidence will likely remain under pressure.”
The European crisis and slower growth in China have put a damper on sales, he said, while uncertainty over the cliff is leading companies to put off investments in new equipment and hiring of workers.
Just over half of the 165 CEOs surveyed expect an increase in sales over the next six months, with less than a third forecasting increased hiring and spending. The combined Economic Outlook Index fell to 66.0 in the third quarter, down from 89.1 and 96.9 in the second and first quarters respectively. The drop, McNerney said, "reflects a pretty significant downturn in expectations."
While a post-election deal in November or December would be ideal, a congressional punt on a long-term deal could still give the business sector more clarity, as long as it is combined with spending and revenue commitments, McNerney said.