One on One with Harold McGraw, Chairman of the Business Roundtable
Tuesday, December 04, 2007
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SUSIE GHARIB: Joining us now to talk more about that CEO survey, Harold McGraw, chairman of the Business Roundtable and chairman and CEO of the McGraw Hill companies. And welcome back to the NIGHTLY BUSINESS REPORT, Mr. McGraw.
HAROLD MCGRAW, CHAIRMAN, BUSINESS ROUNDTABLE: Hi, Susie. Good to be with you.
GHARIB: Let me just start out by saying that it was a pretty optimistic outlook from these CEOs. Why the optimism?
McGRAW: Well, it's a little bit of an up tick from the third quarter survey, so it's not a big (INAUDIBLE) but it's going in the right direction. What we asked our CEOs to do was to project what they thought sales and capital spending and employment would be in the next six months. And what they're seeing is steady, slower, but study growth.
GHARIB: Yes, I saw that hiring is going to hold steady or slightly up, business investment spending also steady or slightly up. Did that surprise you? I mean given everything that's been going on in the economy, the kinds of economic forecast that we've been seeing, did this surprise you?
McGRAW: It did a little bit. I thought it would have been a little bit of a downturn from the third quarter. And so it was a nice surprise to see that it had gone that direction. We also asked the CEOs what are the biggest cost pressures? And health care has been at the top of that list for some time. But for the first time, energy was at the top of that list and in equal position to health care and that's surprised us a little bit. It seemed like at $70 and $80 a barrel, it didn't even get people's attention. But it certainly got the CEOs' attention when it got up towards $100 a barrel.
GHARIB: How serious an impact do you sense from your survey that high energy prices are going to have on businesses?
McGRAW: Well, I think it's certainly going to have an impact. And this survey certainly demonstrates that. But I think as we get into next year, the concerns that we're going to have to watch are going to be certainly the consumer. We've got to make sure and that's that 70 percent of the economy and the consumer is facing higher energy prices, mortgage issues, as well as declining home prices. So that's not a very good threesome there. We're going to have to watch very carefully. But to date the consumer is still spending at a very good rate and doesn't appear to be slowing down at all.
GHARIB: Do you get the sense that the problems that we've been seeing with the credit crunch and consumer spending and consumer confidence, that we're at the end of that worrisome cycle or is there more to come?
McGRAW: Well, I think that we're, you know, I think a lot of the bad news is out especially when we start talking about some of the sub-prime mortgage market and the like. I think that there will be some more coming up. But we've seen all the big write downs and again I think that it's not over but, you know, it's certainly going to have to settle out. It's going to take a little time though for that confidence and stability to get back. Once people get fearful and very uncertain, they're not going to switch that mood very quickly.
GHARIB: What about the attitude of CEOs themselves? You're the chairman of the Business Roundtable. You interact a lot with the CEOs of powerful companies all over the United States. What is the sense that you get from them of their attitude about the current economic conditions?
McGRAW: Well, they certainly know that the economy is slowing down and they certainly know that the indicators still are all quite good. And everybody is watching the things that could go wrong, those dark clouds that could exist out there. But you have to also remember, Susie that these are all global companies for the most part. World growth this year will be 4.9 percent. Places like China are growing at 11.5 percent, India 9.5 percent and so they're benefiting from, you know, that world growth and that part will continue. The things that we've got to do is we've got to make sure that we keep our competitiveness level up. And there's a number of things that we have to do on the health care front, on the trade front and certainly on the work force development and education agenda.
GHARIB: All right. Thank you so much for coming and sharing with us the results of your survey. We really appreciate it.
McGRAW: Thanks so much, Susie.
GHARIB: My guest tonight, Harold McGraw, chairman of the Business Roundtable and chairman and CEO of the McGraw Hill companies.
