U.S. chief executives further tempered their near-term economic expectations over worries about taxes and regulatory pressures.
The Business Roundtable (BRT) said Tuesday that its index measuring CEO projections for sales, plans for capital spending and hiring over the next six months declined 6.6 points to 67.5 in the October-December period from 74.1 in the third quarter.
The decline is the third straight, pushing the index to its lowest level in three years, according to BRT’s latest economic outlook survey.
{mosads}Randall Stephenson, chairman of BRT and CEO of AT&T, called the drop in planned investment “alarming” — the index fell 16.7 points to the lowest level since 2009 — and blamed a long-delayed overhaul of the U.S. tax code and rising regulatory costs for most of the decline.
Meanwhile, the outlook for sales decreased by 3.2 points for the first six months of next year.
Hiring plans remained mostly unchanged, although 35 percent said they would increase hiring versus 33 percent in the July-September quarter.
CEOs expect 2.4 percent growth for next year.
The continued cautious tone is stemming from a long-standing business concern about an uncompetitive U.S. tax code that they argue is weighing on investment plans, Stephenson said.
Stephenson argued that the White House could take steps to lessen the regulatory burden — reported by CEOs as the top cost pressure facing their businesses — without congressional help.
“If we want to see the U.S. economy and hiring really take off, Washington needs to adopt a smarter approach to regulation,” Stephenson said.
But they still urged that lawmakers and President Obama join forces to boost economic confidence.
“Congress and the administration need to work together to continue to fund the government, expand trade, agree on a long-term transportation infrastructure investment plan, reauthorize the U.S. Export-Import Bank and renew expired tax provisions,” Stephenson said.
He noted there are some encouraging signs emerging from Congress, including potential passage of a long-term highway spending bill, which includes a renewal of the Ex-Im Bank that would “relieve some anxiety” in the business community.
“We’re a little encouraged by what’s queuing up,” he said.
He also highlighted the possible emerging House-Senate deal on a tax extenders package, including research and development credits he called “major drivers” for businesses to make long-term investment plans.
House and Senate lawmakers are in talks to renew dozens of expired tax credits.
House Republicans, including Speaker Paul Ryan (Wis.) and House Ways and Means Committee Chairman Kevin Brady (Texas) have moved work on the tax code to the top of their agenda for next year, although election-year politics could hamper those efforts.
“It makes no sense to allow tax policies, such as bonus depreciation and the R&D tax credit, to expire this year absent broader corporate tax reform,” Stephenson said.