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Business Roundtable (BRT) is an association of chief executive officers of leading U.S. companies working to promote sound public policy and a thriving U.S. economy.

CEOs find growth, but consumer demand lacking

May 2, 2012
Carter Wood

Two BRT-member CEOs reported the U.S. economy as a mixture of good and bad as they participated in a Milken Institute Global Conference 2012 panel Tuesday.

The two CEOs on the Tuesday panel, "U.S. Overview: Is the Recovery Sustainable?" were Eric Spiegel of the Siemens Corp. who serves as vice chair of Business Roundtable's Education and Workforce Committee, and Gary W. Loveman of Caesar's Entertainment Corp. Loveman chairs BRT's Health and Retirement Committee.

They were joined by Richard Daley, the former mayor of Chicago; John Rogers Jr., the founder  and CEO of Ariel Investments; and John Williams, President and CEO of the Federal Reserve Bank of San Francisco. The Milken Institute's Ross DeVol moderated.

Appropriate to an "overview," the discussion was far-reaching. To pick a few highlights from the CEOs:

Describing conditions in Siemens' many companies as "very mixed," Spiegel found a bright spot in manufacturing:

This re-invigoration of manufacturing in the U.S. is the real deal. We've added four big plants, manufacturing plants, in the U.S. in the past couple of years, and we're seeing a lot of companies doing that kind of analysis and talking to us about our technology....I don't think we've seen the same kind of growth or prospects on the commercial building side.

He observed that anything relating to natural gas was booming, not just the drilling, but pipelines, LNG facilities, CNG and chemical plants. On the latter, Spiegel said: "Who would have thought five or six years ago that we would be building ethylene  crackers in the U.S. again. Five or six years ago, the chemical companies in the U.S. and Western Europe were looking to sell their chemical assets to the Middle East."

However, the low natural gas prices and the end of subsidies have hit renewables (e.g. wind), and nuclear power, he said. The health care industry was consolidating, while infrastructure spending had stalled.

Loveman described the economy as tepid, with consumer demand lacking -- "budget constrained." (A point of view shared by International Paper CEO John Faraci in a recent interview with Larry Kudlow.)

Toward the end of the discussions, the talk turned to inflation and fears thereof. Loveman was pointed in his remarks:

I think, I'll try to say this gently, I think anybody who thinks we ought to worry about inflation today has been hit in the head sometime earlier in their life and doesn't remember.

The country is very weak. We have an excess supply of virtually everything. We have excess supply of houses, excess supply of workers, excess supply of office space, excess supply of retail space.

There's no substantial secular increase in real wages. Other than energy prices, there's nothing pushing prices up, and we have a very weak demand environment.

The idea the economy is getting overheated? I mean, that would be a lovely circumstance if that were to be the case.  It isn't remotely the case. Rates of growth are slowing around the world. We have portions of the world that are experiencing very substantial financial crises related to weakness in demand.

We can worry about inflation  at some point down the road, but I think the Fed has done exactly the right thing...

View video from the Milken Institute Global Conference 2012 below:

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Senior Communications Advisor
Business Roundtable

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