Economic Outlook for Early 2015 Dims

crystal_ballSome of the nation’s business leaders have looked in their collective crystal ball and saw a positive half-year ahead — but their expectations have waned since last quarter.

The lobbying group Business Roundtable reported Tuesday that its measure of the economic outlook among chief executives slipped to 85.1 in the fourth quarter, down from 86.4 the quarter prior. The survey takes measure of 129 executives’ expectations for the next six months of sales, capital spending, and employment. In other words, the CEOs surveyed felt less enthusiastic about the economy’s potential in the next quarter than they did earlier in the year.

Despite the slip in expectations since last quarter, 74% CEOs still forecast sales to climb over the next half-year, while 9% expect a decline, although that is up from 7% in Q3.

In capital spending, 36% expect to spend more, 13% expect to spend less, and 50% say there will be no change.

In terms of hiring, 40% of executives expect to increase hiring, 23% expect a decrease, and 36% say there will be no change.

Executives expect the U.S. economy to grow 2.4% overall in 2015, which is what the group predicted for 2014. (GDP last quarter was about 3.9%.) This figure closely matches LMC Automotive’s prediction of 2.38% growth for the North American automotive space in 2015, to 17.2 million units sold annually up from 16.8 million.

AT&T chairman Randall Stephenson, chairman of the Business Roundtable, said companies are holding back on major expansion plans until they get clarity on future tax bills. Congress is currently debating a set of tax breaks due to expire, but a new Congress takes over in early 2015.

All this forecasting is important because it portends to car sales and credit quality. There have been signs of deteriorating credit quality — although at negligible rates historically — but if the economy weakens, auto finance could face a more challenging lending environment.

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