Confidence in "Economic Soft Landing"... US Companies Increase Investments

The Business Roundtable, a gathering of CEOs from major U.S. corporations, has raised its forecast for U.S. economic growth this year to 1.5%. Following the World Bank's slight upward revision of its U.S. economic growth forecast, private companies have also increased their projections. This indicates a shift from predictions of a recession over the past 18 months to expectations of a soft landing.

On the 7th (local time), the Business Roundtable announced the results of its quarterly survey conducted from the 17th of last month to the 2nd of this month, targeting 143 member CEOs. It forecasted that the U.S. Gross Domestic Product (GDP) growth rate for this year will be 1.5%, slightly higher than the 1.3% forecast in the first quarter survey.

The economic outlook index for the second quarter of this year was 76, slightly down from 78.6 in the previous quarter, but CEOs viewed the risk of an immediate economic contraction as low. The U.S. political media Axios noted that "although the index did not reach the historical average of 84, it comfortably exceeded the baseline of 50, which indicates economic expansion." However, it analyzed that the slight decline compared to the previous quarter was due to persistent inflation, high interest rates, and various global factors (U.S.-China tensions, the Ukraine war, energy conflicts).

The Business Roundtable assessed that the recession forecasts that have continued for 18 consecutive months are turning into expectations for a soft landing. In this survey, 35% of CEOs said they would increase investment over the next six months, up 1 percentage point from the previous quarter. Corporate sales are expected to remain at levels similar to those in the first quarter over the next six months. On the other hand, the percentage of CEOs planning to increase employment decreased from 41% in the first quarter to 33% in the second quarter.

[Image source=Reuters Yonhap News]

The day before, the World Bank also raised its growth forecast from 0.5% to 1.1%, stating that the slowdown in the U.S. economy this year would not be as severe as initially expected. The absolute growth rate forecast by the Business Roundtable was somewhat higher than that of the World Bank.

The S&P Global Purchasing Managers' Index (PMI) for manufacturing and services, which gauges the U.S. economic situation, also indicated an expansion phase with a reading of 54.3, above the baseline of 50. S&P Global predicted the fastest expansion in business activity in over a year. Chris Williamson, Chief Economist at S&P Global Market Intelligence, said, "The U.S. economy is growing at a pace slightly above 2% annually," and added, "As business sentiment improves, the U.S. economic growth is expected to strengthen further as we approach summer."

The U.S. economic growth rate experienced a technical recession with two consecutive quarters of negative growth during the first half of last year amid the COVID-19 pandemic, but rebounded sharply in the third quarter (3.2%) and fourth quarter (2.6%), and maintained slow growth of 1.1% (preliminary figure) in the first quarter of this year.

Mary Barra, Chair of the Business Roundtable and CEO of General Motors (GM), said, "The U.S. Congress's final passage of the debt ceiling negotiation bill, which eliminated the possibility of a U.S. default, has greatly helped stabilize corporate investment sentiment," adding, "Corporate executives are ready to cooperate with Congress to promote policies that strengthen the economy and U.S. competitiveness."