Top executives lower their expectations for the US economy

29 September 2011 21:19  [Source: ICIS news]

WASHINGTON (ICIS)--Top US business executives have lowered their expectations for the nation’s economy, a key survey said on Thursday, with many saying they anticipate declining sales, lower capital spending and even less hiring over the next six months.

In a regular quarterly survey of its chief executive members, the Business Roundtable said that its third-quarter sampling shows “declines in each category of economic measurement” in the managers’ views.

Roundtable chairman and Boeing Co chief executive Jim McNerney said that the third quarter survey results “reflect increased uncertainty among CEOs concerning the economic climate and business environment”.

Among the survey findings, only 65% of the responding chief executives said they expect their company’s sales to improve over the next six months. 

While that level of expectation looks relatively strong, it is down by 22 points from the second quarter this year when the survey found that fully 87% of top executives were looking forward to higher sales.

Only 32% of the responding CEOs said they expect to increase capital spending over the next half-year, down sharply from the 61% who had expected more spending in the second-quarter survey.

While 51% of top managers said in the second quarter that they expected to hire more workers over the next six months, that ratio had fallen to only 36% in the just completed third-quarter survey.

Overall, the Business Roundtable’s CEO economic outlook survey index fell to 77.6 in the third quarter, down sharply from the readings of 113 and nearly 110 recorded in the first and second quarters this year respectively.

Those responding to the survey on average predicted US gross domestic product (GDP) growth of only 1.8% for full-year 2011, down from the 2.8% GDP growth forecast they gave just three months ago.

In normal economic times, the US economy would be expected to grow at a pace of 3% to 3.5%, and GDP expansion needs to be at a minimum of 2.5% just to accommodate new workers entering the jobs market.

Economists say that the nation’s 9.1% unemployment rate and the pool of some 14m jobless workers cannot be brought down in any significant way unless the economy grows at a pace well above 3.5%.

In the first quarter this year, US GDP grew at an anaemic 0.4% annual pace, and in final figures issued earlier on Thursday, the Commerce Department said second quarter US GDP growth was at an annual rate of 1.3%.

The member companies of the Business Roundtable represent $6,000bn (€4,440bn) in annual revenues, more than 14m employees and nearly a third of the total value of US stock markets, according to the group.

($1 = €0.74)

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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