No More 10 Minute Breaks: Corporate CEOs Say Increased Capital Spending Rests on Tax Reform

Leaders of America’s largest companies expressed strengthening confidence in plans to ramp up capital investment and ultimately productivity over the next six months, contingent on Congress’s ability to pass tax reform.

Chief executives’ plans for capital investment rose to their highest level since the second quarter of 2011, according to the Business Roundtable’s fourth-quarter survey of CEOs.

Jamie Dimon, chairman of the Business Roundtable and chief executive of J.P. Morgan Chase & Co., said business confidence in economic growth is dependent on actions from economic policy makers.

“To continue this momentum, it is critical that we enact pro-growth tax reform that will level the playing field for U.S. business to be globally competitive,” Mr. Dimon said.

The Senate passed a bill with sweeping revisions to the U.S. tax code after midnight Saturday, and House and Senate Republicans will now attempt to reconcile the competing tax bills they passed into one measure that can pass both chambers again this month. The bill, which included about $1.4 trillion in tax cuts, would lower the corporate rate to 20% from 35%, reshape international business tax rules and temporarily lower tax rates for individuals.

Meanwhile, chief executives’ hiring expectations for the next six months are slightly less robust in the fourth quarter than in the third quarter. The share of firms planning to reduce staff over the next six months rose slightly, while the share planning to increase hiring held steady. The share of firms planning to reduce staff over the next six months rose slightly to 18% from 13%, while the share planning to increase hiring held steady at 43%.

Joshua Bolten, Business Roundtable president and CEO, said the dip in hiring plans represented “just a slight reduction from the forward-looking optimism of last quarter,” while noting the employment index remained at a “very high level.”

Overall optimism among America’s business leaders remains high. The Business Roundtable CEO Economic Outlook Index–a composite of CEO plans for capital spending and hiring and projections for sales over the next six months–reached its highest level in nearly six years, increasing to 96.8 for the fourth quarter, up from 94.5 in the third quarter.

The survey of 150 chief executives at large U.S. businesses was conducted between Nov. 2 and Nov. 17.

Corporate CEOs Say Urgent Tax Overhaul Would Boost Hiring and Investment (June 6)

CEOs Optimistic About Donald Trump’s Policies, But Wary of ‘One-Off Situations’ (Dec. 6, 2016)

from Real Time Economics http://ift.tt/2ARPJ3z