Money Talk: CEOs say economy still performing below its potential

Editor’s note: Each Monday, Talk Business & Politics provides “Money Talk,” a wrap-up of banking and financial news. 

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CEOs SAY ECONOMY STILL PERFORMING BELOW ITS POTENTIAL
For the fourth quarter in a row, CEO expectations on the economy remain mixed, indicating an economy performing below its potential, according to the Business Roundtable first quarter 2016 CEO Economic Outlook Survey. The Business Roundtable CEO Economic Outlook Index — a composite of CEO projections for sales and plans for capital spending and hiring over the next six months — increased modestly from 67.5 in the fourth quarter of 2015 to 69.4 in the first quarter of 2016. The index remains near three-year lows.

CEO expectations for sales over the next six months increased by 8.5 points, and their plans for capital expenditures increased by 7.1 points, relative to last quarter. Hiring plans declined by nearly 10 points from last quarter. In their second estimate of real GDP growth for 2016, CEOs expect 2.2% growth, down from their 2.4% estimate at the end of 2015. Results of this and all previous surveys can be found here.

PAINT THE TOWN: SHERWIN-WILLIAMS ANNOUNCES $11 BILLION DEAL TO ACQUIRE VALSPAR
Sherwin-Williams Co. announced Sunday afternoon (March 20) that it will acquire rival Valspar Corp. for $113 per share in an all-cash transaction, or an enterprise value of approximately $11.3 billion. The deal, which has been unanimously approved by the boards of directors of both companies, represents a premium of nearly 41% over Valspar’s average stock price over the past 30 days.

Sherwin Williams said the combined company as of fiscal 2015 would have pro forma revenues and earnings of approximately $15.6 billion and $2.8 billion, respectively, with 58,000 employees. The transaction is expected to close by the end of first quarter of 2017 and must pass review by U.S. antitrust regulators under the Hart-Scott-Rodino Act.

NEGATIVE EQUITY RATE DROPS TO 13%, STILL HOLD BACK FULL U.S. HOUSING RECOVERY
Fewer homeowners were underwater as the negative equity rate fell to 13.1% in the United States, according to the fourth quarter Zillow Negative Equity Report.

But more than 820,000 underwater homeowners still owe over twice as much on their mortgages as their homes are worth, a reminder that some owners may not see positive equity in their homes in the foreseeable future.

Six million homeowners were still in negative equity, which means they owe the bank more than their homes are worth. A year ago, 8 million homeowners were upside down on their mortgages. Las Vegas, ground zero of the housing crash, still had the highest rate of negative equity at 20.9%, followed closely by Chicago, where 20.5% of homeowners were upside down on their mortgages. In San Jose, only 2.8% of mortgaged homeowners were underwater.