Do Top U.S. Executives Believe A ‘Recovery’ is Taking Place?

There is no doubt that the U.S. economy is still struggling to make a convincing recovery from the credit meltdown. Asset prices have been pushed higher by the Federal Reserve, and the labor market is failing to keep pace with population growth. However, the latest report on sentiment from chief executive officers predicts a slight improvement for certain areas of the economy over the next six months.

The Business Roundtable, which is an association of chief executive officers of leading U.S. companies, recently published its second-quarter CEO Economic Outlook Survey. The survey was completed between May 13 and May 31, and provides a forward-looking view on the economy.

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As the chart above shows, the economic index for the survey increased to 84.3 in the current quarter, compared to 81.0 in the first quarter. It is the second uptick in five quarters and the highest reading since the second quarter of 2012 – when the index hit 89.1. The current long-term average is 79.3.

In terms of the overall U.S. economy, the group expects real GDP to grow at 2.2 percent  annual rate, up from last quarter’s estimate of 2.1 percent.Illustration by Chelsea Pieroni

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Jim McNerney, chairman of the Business Roundtable and chief executive officer of The Boeing Company (NYSE:BA), explains in a press release, “Survey results show CEOs expect a small increase in overall economic growth this year led by modest improvement in sales and hiring. Overall, CEOs see the U.S. economy still on a slow road to recovery.  Relative to economic conditions, business performance remains strong, but the U.S. government’s unresolved long-term fiscal path and an uncertain political environment are key obstacles to more robust economic growth and hiring.”

Other members of the Business Roundtable include executives from companies such as Bank of America (NYSE:BAC), Microsoft (NASDAQ:MSFT), Sprint Nextel (NYSE:S) and General Electric (NYSE:GE).

The survey’s key findings for the first and second quarter are shown below. Despite the unemployment rate recently edging higher, the percentage of CEOs saying they plan to increase employment increased from 29 percent to 32 percent, while those saying they plan to decrease employment only ticked 1 percent higher to 26 percent. Seventy-eight percent of CEOs expect their sales to increase in the next six months, compared to 72 percent in the previous survey.

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The Business Roundtable’s CEO Economic Outlook Survey has been conducted quarterly since the fourth quarter of 2002. The organization represents leading U.S. companies with more than $7.3 trillion in annual revenues and nearly 16 million employees. Members account for almost a third of the total value of the U.S. stock market.

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