Why top CEOs have a spring in their step

Optimism among the nation’s top business leaders is at its highest level in two years, according to a new survey released Tuesday.

{mosads}A quarterly index of CEOs reached 92.1 during the first three months of the year, up from 84.5 during the fourth quarter of 2013. That’s the highest level since the gauge hit 96.9 in the January-March period of 2012.

The CEO Economic Outlook Index, which is compiled by the Business Roundtable, is easily above its long-term average of 79.7.

The leaders of the Roundtable said that the bipartisan budget deal forged in December went a long way toward boosting expectations among CEOs despite other drags on the economy.

Overall, CEOs expect to see modest increases in sales, hiring and investment this year, though they say Congress must take action on a slew of major initiatives for growth to take off.

They expect the economy to churn out 2.4 percent growth this year, up slightly from the 2.2 percent expectation in the fourth quarter of last year.

But business leaders argue that is well below what is possible, noting that it has been nearly 10 years since annual growth was at 3 percent.

“CEO expectations for overall economic growth are well below our economy’s potential,” said Randall Stephenson, chairman of BRT and chairman and CEO of AT&T.

John Engler, BRT’s president, argued that no one should be “lulled into accepting” the current rate of growth as the new normal.

The CEOs are pressing for lawmakers to overhaul the tax code, pass a trade promotion authority bill, finish pending trade agreements and enact an immigration overhaul.

“The most powerful driver is tax reform,” Stephenson said.

Stephenson said economic growth is dependent on private-sector capital investment “and its key planks are fiscal stability, business tax reform, expanded trade and immigration reform.”

But most of those top-priority items aren’t expected to get pushed through Congress this year with the midterm elections looming in November.

Still, Engler said he hopes Congress can make progress on fast-track authority, which would give Congress the ability to shape the contents of trade agreements and smooth them through to passage.

Stephenson said business leaders are not “ready to concede” that some legislation can’t pass this year.

The survey, which has been conducted quarterly since the third quarter of 2002, showed that 72 percent of CEOs anticipate sales will increase in the next six months, but only 37 percent expect to add employees and less than half expect to increase capital investment.

Other results include: 

• 56 percent of CEOs said they would invest and hire more if Congress and the Obama administration were to cooperate on business tax and immigration reform and move forward on free trade agreements with European Union and Pacific and Latin American nations.

• More than 70 percent said that expanded U.S. trade opportunities would have a positive effect on their businesses, with 42 percent saying they would hire additional employees if global trade expanded.

• 89 percent said regulation has had either a moderately significant or very significant material impact on their investment and hiring activities.

– This post was updated at 11 a.m.