Fiscal-Cliff Concerns Hurting Economy as Companies Hold Back

http://mobile.businessweek.com/news/2012-06-19/fiscal-cliff-concerns-hurting-economy-as-companies-hold-back

Companies are starting to delay hiring and spending out of concern that Congress won’t reach a compromise in time to avoid automatic tax increases and budget cuts that would pull billions of dollars of purchasing power out of the economy.

Faced with a so-called fiscal cliff of more than $600 billion in higher taxes and reductions in defense and other government programs in 2013, U.S. companies are pulling back, though the deadline for congressional action is more than six months away.

Eaton Corp. CEO Sandy Cutler
The best strategy for companies to follow when confronted with such uncertainty ahead of Dec. 31 is to “stay lean and keep your inventories taut,” Sandy Cutler, chief executive officer of industrial equipment-maker Eaton Corp. (ETN) in Cleveland, told a conference May 31.

Economists are predicting this trend will pick up through the year. “A lot of people see the fiscal cliff as a 2013 story, but you don’t board up the windows when the hurricane is there, you board up the windows in anticipation,” said Michael Hanson, senior U.S. economist at Bank of America Corp. in New York.