WASHINGTON, Dec. 14 /PRNewswire/ -- Business Roundtable's December 2005 CEO Economic Outlook Survey shows that America's leading CEOs see broad strength in the economy moving into 2006, despite a recent series of economic challenges. As a result, the CEO Economic Outlook Index has rebounded from its post-Hurricane Katrina level of 88.2 in September to reach 101.4, a high second only to the reading of 104.4 in the first quarter of 2005. In the annual question about challenges to growth, for the third consecutive year CEOs cited health care costs as the greatest cost pressure, while energy costs have supplanted litigation costs as the number-two concern. Business Roundtable is an association of chief executive officers of leading corporations with a combined workforce of more than 10 million employees and $4 trillion in annual revenues. "Going into 2006, America's CEOs believe that the economy will remain resilient despite the challenges of several unanticipated events," said Hank McKinnell, chairman of Business Roundtable and chairman and CEO of Pfizer Inc. "The confidence of U.S. business leaders has rebounded even in the wake of devastating natural disasters, persistently high oil prices and a continuing volatile geopolitical environment worldwide." The survey's key findings for the first half of 2006 include: Increase No Change Decrease 1. How do you expect your company's sales to change 87% 9% 5% in the next six months? 2. How do you expect your company's U.S. capital spending to change in the 56% 40% 5% next six months? 3. How do you expect your company's U.S. employment to change in the next 40% 41% 19% six months? On overall economic growth, CEOs are assuming a figure of 3.3 percent GDP as they draw up their business plans for 2006. By comparison, GDP growth is expected to be 3.4 to 3.5 percent in 2005, above the average 3.1 percent growth rate of the past 35 years. "In each of the three areas of this survey -- sales, capital spending and employment -- more companies still anticipate expansion rather than contraction," continued McKinnell. "Capital expenditure plans continue to reflect steady gains, and employment predictions by the nation's leading companies are near their all-time high." Rising Health Care Costs Remain Greatest Cost Pressure Energy Costs Rise Above Litigation to Number Two For the third year in a row, CEOs cited health care costs (42 percent) as Corporate America's number one pressure across the economic spectrum. Energy costs (27 percent), cited as the third greatest pressure in 2004, have supplanted litigation costs as the number two area of cost pressure for large U.S. companies. Litigation costs dropped to 9 percent from 20 percent in 2004; materials and pension costs tied at 8 percent each as a cost pressure for companies, while labor was listed by 4 percent. (Greatest Cost Pressure chart can be viewed at http://www.businessroundtable.org/newsroom/document.aspx?qs=58E6BF807822B0F1AD 0448122FB51711FCF50C8) "Clearly, soaring health care costs remain the most serious concern of America's business leaders," said McKinnell. "These costs harm our nation's economic health and our ability to compete. In 2006, Business Roundtable CEOs will continue to work to reduce these costs while also improving health care quality and access. "And while passage of class action legislation this year appears to be relieving litigation cost pressures, CEOs are increasingly alarmed at the negative effects of rising energy costs on America's businesses, consumers and economy," McKinnell continued. "We will continue to watch these costs in the coming year while advocating for energy policies that ensure diverse supply, expand development of technology, and promote conservation and efficiency." CEO Economic Outlook Index Rebounds from Post-Katrina Level The CEOs' economic projections resulted in a CEO Economic Outlook Index reading of 101.4, a strong upward shift from the depressed index reading of 88.2 in September following Hurricane Katrina. This new December reading is near the survey's record-high index of 104.4 in the first quarter of 2005. The CEO Economic Outlook Index combines the responses on projected sales, capital spending and employment into an overall index that shows how the CEOs believe the U.S. economy will perform in the six months ahead. It is a diffusion index centered on 50, which means anything above 50 is expansion and anything below 50 is contraction. CEO ECONOMIC OUTLOOK INDEX Survey CEO Economic Date Outlook Index December 2005 101.4 September 2005 (Post-Katrina) 88.2 September 2005 (Pre-Katrina) 95.9 May 2005 94.3 March 2005 104.4 The Roundtable's CEO Economic Outlook Survey, which has been conducted quarterly since the fourth quarter of 2002, provides a forward-looking view of the economic assumptions and outlooks of Roundtable companies. The December survey was completed by 117 of the Roundtable's 160 member companies. The percentages in some categories may not add up to 100 because of rounding. Results of all surveys can be found at http://www.businessroundtable.org. Business Roundtable is an association of chief executive officers of leading corporations with a combined workforce of more than 10 million employees and $4 trillion in annual revenues. The chief executives are committed to advocating public policies that foster vigorous economic growth and a dynamic global economy.
SOURCE Business Roundtable