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CEOs more cautious on U.S. growth outlook

September 18, 2007|From Reuters

CHICAGO — The top executives of America's largest companies have grown more cautious about the economic outlook, according to a survey released Monday by the Business Roundtable, but they still expect growth despite the turmoil in the world's credit markets and what it characterized as the "recession" in U.S. housing.

The group said its CEO economic outlook index dropped to 77.4 in the third quarter from 81.9 in the second quarter. Any reading above 50 in the index reflects expectations of growth in the coming six months.

The CEOs' forecast of U.S. gross domestic product growth this year also declined. The group now expects 2.4% GDP growth in 2007, down from an earlier forecast of 2.6%.

Harold McGraw III, the group's chairman and the president of McGraw-Hill Cos., characterized the deterioration in CEO sentiment as "a slight dip." He said it reflected expectations that the U.S. economy would "settle into a pattern of softer growth," despite what he said was a "recession" in the U.S. real estate market.

The quarterly report came out just hours after former Federal Reserve Chairman Alan Greenspan said the risks of a U.S. recession had increased. The biggest risk, Greenspan said, would be a substantial drop in house prices that would prompt consumers to cut back on spending.

McGraw acknowledged that the risk of the housing recession reverberating into the wider economy was real. But he said his group's survey of CEOs suggested they "were more positively disposed that it will not spread."

Sixty-eight percent of CEOs said they expected their companies' sales to rise over the next six months. But only 33% said they expected to increase their U.S. staffing over the next six months, and only 35% said they expected to raise their capital spending over that period.

The Business Roundtable is an association of the top executives of 159 U.S. companies that together employ 10 million workers and generate $4.5 trillion in annual revenue.

The survey was conducted Aug. 20 to Sept. 5.

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