E-conomics, S&P earnings Look Weak for US CEOs

E-CONOMICS – A recent survey showed that US business leaders are expecting weaker rates for hiring, investments, and sales for the second quarter of 2019.

The CEO Economic Index, which measures business confidence among major US corporations, slipped 5.7 points during the second quarter. It’s now valued at 89.5.

CEO plans for hiring additional employees fell 5.2 points to 75.2, while capital investment plans lost 2.9 points to 88.1. Expectations for company sales shed 8.9 points to 105.1.

More importantly, gross domestic product in 2019 would have a 2.6% growth, based on the survey that asked 127 CEOs.

This was 0.1 percentage point higher than the forecast made during the previous quarter.

The survey comes “during a turbulent few weeks for US trade relations with China and Mexico.”

Business Roundtable President and CEO Joshua Bolten said that even if US companies are “ready and eager” to invest and hire in the US, trade policy uncertainties are making things more difficult for companies that want to invest and operate confidently.

JPMorgan Chase & Co CEO and Chairman Jamie Dimon backed this up, saying that the “uncertainty about US trade policy, softening global growth conditions, and inaction on other pressing public policy issues are a concern.”

E-conomics: Trade War Woes

Dimon urged the Trump administration and the US Congress to push for policies that would “encourage inclusive growth, innovation, and opportunity.”

Such policies should include generous investment in infrastructure and workforce, immigration reform, and trade expansion.

Overall, companies that have higher global exposure are vulnerable to the adverse effects that the US-sparked trade tensions might cause.

“With a few weeks remaining in the second quarter, there are concerns in the market about the impact of trade tensions and slower global economic growth on companies in the S&P 500 with higher international revenue exposure,” said Factset in a report.

According to estimates, S&P 500 companies that generate more than half of their sales outside the US will decline 9.3% in their Q2 earnings.

For their revenues, the companies will have to shoulder a 1.2% decrease, said Factset.

Earnings growth of all the companies in S&P 500 is anticipated at 2.3% for the second quarter.

“If -2.3% is the actual decline for the quarter, it will mark the first time the index has reported two straight quarters of year-over-year declines in earnings since Q1 2016 and Q2 2016,” according to Factset.