Bad News Bias: A Tale of Three Economic Surveys

Survey question: If the media had the results of three independent surveys of corporate executives about the economy and two of them were more negative than the third, which one wouldn't get much coverage?

In the last few days, three such surveys have been released. Two of them - the Business Roundtable's quarterly CEO Economic Outlook Index and the Duke University/CFO Magazine Global Business Outlook survey - got pretty good coverage in the media.

The third survey, conducted by the University of North Carolina's Kenan-Flagler Business School for the American Institute of Certified Public Accountants, less so.

The Duke/CFO magazine survey got coverage from the Charlotte Observer, New York Sun, New York Times, Forbes and CNN (and CFO magazine, naturally).

The Business Roundtable survey also got coverag in multiple media.

The AICPA/UNC survey? Not so much. In fact, the only media outlet I've found that covered it is Financial Week.

How do the surveys' results differ?

The Roundtable's quarterly CEO Economic Outlook Index tumbled five points to 74.5, its lowest level since October 2003 and the sharpest drop in the index in almost two years. Forbes's headline on the Reuters story: Corporate America taking grimmer view of economy.

However, the story notes, "Any reading above 50 indicates growth."

The story continues:

The survey found CEOs had also cut their forecast for overall U.S. economic growth. They now expect gross domestic product to rise 1.3 percent in 2008, down from a prior forecast of 1.5 percent.

Thirty-one percent said they expect their companies' U.S. headcount to fall over the next six months, while 28 percent expect it to rise. In the first quarter, 22 percent of CEOs had expected their staffing levels to decline.

Sixty-eight percent said they expect their sales to rise over the next six months...

The headline could as easily have read "Corporate America sees economy continuing to grow slowly."

The same story also reported on the second survey, the Duke University/CFO Magazine Global Business Outlook, with the same gloomy tone, even though that survey, too, contained positive data. CFO magazine's story says this:

On the bright side, CFOs show somewhat less pessimism than they displayed in the previous quarter, despite the generally gloomy environment. After several quarters of declining optimism, 53 percent of CFOs say they are more pessimistic about the U.S. economy this quarter, and 21 percent say they are more optimistic. In the last survey, released in March, optimism reached a six-year low. At that time, 72 percent of finance chiefs were more pessimistic about the U.S. economy than they were the quarter before, while 8 percent felt more optimistic.

Now, what about the AICPA/UNC survey? It, too, finds both negative and positive views. From Financial Week's story:

Just over half of the 1,400 C.P.A.s in corporate financial positions surveyed early last month by the American Institute of Certified Public Accountants (AICPA) said they expect some growth in revenue, profits and employment at their own organizations over the next 12 months. ... And while 57% of them said they were pessimistic or very pessimistic about the prospects for the nation's economy this year, roughly equal to their views of last quarter, 45% said they were optimistic or very optimistic about their own company's prospects, according to the survey, conducted for the AICPA by the University of North Carolina's Kenan-Flagler Business School.

Arthur Jones, a senior economist at CBRE Torto Wheaton Research, said the disparity in outlooks revealed by the survey may be a reflection of the fact that the economic downturn is “very industry specific.”

For example, the auto, financial services and construction industries have been particularly hard hit in the current downturn and are shedding jobs, but other industries, such as health care, technology and services, have been largely unaffected.

Mr. Jones said that from a strictly employment perspective, “things aren't quite as bad as they seem to be,” as the job losses seen so far this year are nowhere near what they were in the last downturn in 2001-2002, and jobs provide the underpinning of the economy.

When it comes to the economy, the good news is the news isn't all bad. The bad news is the news media tends to cover the bad news more than the good.