Key Points:

  • The Business Roundtable said Wednesday that optimism among CEOs of major U.S. companies rose this quarter, with expectations for sales growth over the next six months and plans to increase capital spending.
  • The CEO Optimism Index rose 9 points from the previous quarter to 89, above the historical average of 83. The survey ended on March 6, following the Supreme Court's rejection of most of the Trump administration's tariffs on February 20 and the outbreak of the Iran war on February 28.
  • "This quarter's survey shows a significant improvement in CEO confidence," said Joshua Bolten, president of the Business Roundtable. "The rise in the overall index is encouraging, especially the solid gains in sales and capital spending, but the employment picture remains concerning, with as many CEOs planning layoffs as those planning to add jobs."

In-Depth Analysis:

The optimism among CEOs of large companies stands in stark contrast to the pessimistic views of small business owners. The National Federation of Independent Business said Tuesday that small business confidence last month fell short of expectations, with the proportion of owners expecting sales growth in the coming quarter declining. However, actual sales reports hit their highest level since May 2022, and profit trends also improved. According to the Small Business Administration, 46% of U.S. workers are employed by small businesses.

Among large companies, despite global uncertainties, sales and capital spending plans rose by 6 and 12 points, respectively. Chuck Robbins, CEO of Cisco and chairman of the Business Roundtable, said in a statement that the results "point to the impact of last year's tax reform, responsible deregulation, and the resilience of the U.S. economy."

The Atlanta Fed predicted on March 6 that U.S. GDP would grow at an annualized rate of 2.1% this quarter. The "global uncertainties" Robbins referred to have intensified in recent weeks, with the Iran war pushing Brent crude futures to nearly $120 per barrel on Monday. The price fell back to $92 on Wednesday but remains more than 13% higher than before the escalation of the conflict on February 27.

The surge in oil prices has raised fuel costs for U.S. consumers. The American Automobile Association said Wednesday that the average price of regular gasoline jumped 12% over the past week from $3.20 to $3.58 per gallon. Inflation remained stable last month before U.S. and Israeli airstrikes on Iran. Data released by the Labor Department on Wednesday showed that consumer prices rose 2.4% year-over-year in February, unchanged from January and in line with expectations. Core prices, excluding volatile energy and food costs, rose 2.5% year-over-year. Inflation has remained above the Federal Reserve's 2% long-term target for five consecutive years.