CEO optimism is nearing record highs, according to Business Roundtable’s quarterly CEO economic outlook survey released on Tuesday. The group's economic outlook index increased in the second quarter to 116 — up nine points from the first quarter and just two points below the all-time high in early 2018.
“CEO optimism near historic highs, particularly with record hiring plans, is a strong sign that we are climbing out of this unprecedented crisis," said Doug McMillon, Walmart CEO and Business Roundtable Chairman.
"By continuing to encourage more Americans to get vaccinated, we can ensure a continued safe reopening in the short term, and a stronger and more equitable economy in the long term," he added.
This is the latest evidence that executives feel the U.S. economy is getting back on track after the pandemic. A recent survey from The Conference Board also found CEO confidence was at its highest level since 1976.
The Business Roundtable index showed the executives’ plans for hiring, capital investment and sales all increased in the second quarter — with plans for hiring over the next six months reaching historically high levels.
Sixty percent of CEOs said they planned to increase hiring over the next six months, compared to 51% in the first quarter. Of the CEOs surveyed, 59% said they expect to increase capital investment over the next six months — up from 57% in the previous quarter. Ninety-one percent of executives said they expect sales to increase over the same time period, up from 87% in the first quarter. The group surveyed 172 CEOs between May 25 and June 9, 2021.
"We're not long-term pessimistic about the situation," said Bolten, noting school reopenings in the fall, declining safety concerns about the risk of COVID-19 and the expiration of enhanced unemployment benefits in September should lead to more people getting back to work.
Gregory Hayes, Raytheon Technologies Corporation Chairman and CEO and Business Roundtable Tax and Fiscal Policy Committee Chair, told reporters Raytheon is not seeing a problem finding workers, but he is concerned about the rising prices of raw materials.
"The hope of the Fed is that this is transitory. The question is, how long is transitory? Is it six months? Is it 12 months?," said Hayes. "We're starting to see that pressure out there. We hope that the Fed is right and the Fed will take whatever action is necessary to cut this off before it really does become an inflationary spiral."
Seventy-five percent of CEOs say conditions for their companies have already bounced back to pre-pandemic levels or will recovery by the end of the year — up 2 percentage points from the previous quarter. A quarter of chief executives don't expect business conditions to recover until 2022 or later.
The group, which is made up of CEOs of the nation's largest companies, encouraged lawmakers to build on the economy recovery by passing a bipartisan infrastructure bill, but warned against raising taxes.
"Proposals to increase corporate tax rates would have significant adverse effects on hiring and investment plans and would be counterproductive to the goal of greater economic growth and opportunity for all Americans," said Hayes.
The Biden administration has proposed raising corporate taxes to 28% from 21% in order to fund an infrastructure package. In a call with reporters, Business Roundtable Leaders argued uncertainty around taxes can put a damper on U.S. corporations' plans for growth.
"It certainly gives us pause as we think about that next big, billion-dollar investment that we're going to have to make," said Hayes. "This uncertainty is a dilemma for many of us as we think about the next 5, 10, 15 years."
The CEOs predict 5% growth for 2021, a 1.3 percentage-point increase from their estimate of U.S. GDP growth last quarter.
"It is absolutely critical though, as we think about economic growth for the longterm...that we invest in infrastructure," said Hayes. "Infrastructure is the key to long-term economic growth. It's also the key to prosperity and to workers growth in wages across this country."