* 34 pct of CEOs expect to cut jobs in next six months
* View on capital spending, sales growth also weaken
* Concerns about U.S. fiscal cliff darken outlook
* Problems may not be resolved until after election
By Scott Malone
Sept 26 (Reuters) – U.S. chief executives’ view of the
economy deteriorated sharply in the third quarter and is now as
bleak as it was in the immediate aftermath of the last
recession, according to a survey released by the Business
Roundtable on Wednesday.
CEOs have become more likely to cut jobs than add them in
the United States over the next six months, and also said they
were less likely to raise their capital spending, as companies
hold onto cash in the face of economic uncertainty.
The group’s CEO Economic Outlook Index tumbled to 66 in the
third quarter from 89.1 in the second, in the third-sharpest
drop recorded in the survey’s decade-long history.
The measure of CEO confidence fell to its lowest point since
the third quarter of 2009, when the United States had just
emerged from its worst recession in 80 years. But the gauge
remained above the 50 mark separating growth from decline.
CEOs are particularly worried about the “fiscal cliff,” some
$500 billion in federal spending reductions and expiring tax
cuts due to take effect if Congress and the White House are
unable to find a compromise on deficit reduction by Dec. 31.
“The past quarter has seen continuing concerns about
uncertainty surrounding the fiscal cliff, the continued inaction
in Washington that is holding up much-needed tax, fiscal,
entitlement and regulatory reforms that would provide certainty
for businesses,” said James McNerney, CEO of Boeing Co,
who also serves as chairman of the Roundtable.
Falling demand in Europe and Asia were also taking a toll on
companies’ prospects, McNerney said.
Thirty-four percent of the 138 U.S. CEOs surveyed expect to
cut jobs in the United States over the next six months, up from
20 percent a quarter ago, while 30 percent plan to raise capital
spending, down from 43 percent. Fifty-eight percent expect their
sales to rise over that time period, down from the previous
survey’s 75 percent.
CEOs of Roundtable companies, which collectively generate
$7.3 trillion in annual revenue and employ some 16 million
people, also lowered their forecasts for U.S. economic growth.
They now expect real gross domestic product to rise 1.9 percent
in 2012, down from a June forecast of 2.1 percent growth.
The report came a day after the U.S. Conference Board showed
U.S. consumer confidence had rebounded to a seven-year high in
September. But it mirrored other recent measures of corporate
activity that showed manufacturing has contracted for the last
three months and new claims for jobless benefits, which have
held near two-month highs.
Another survey, by Deloitte, found that chief financial
officers’ view of business prospects had also darkened in the
quarter. It found CFOs had lowered their expectations for
hiring, capital spending and earnings growth in the quarter.
Sentiment among small businesses has also been hurting as
owners fret about weak consumer demand. Still, other pockets of
the economy have seen resilience, including the vast services
sector which expanded last month as employment picked up.
PRE-ELECTION IMPASSE
The findings come less than two months ahead of the U.S.
presidential election, in which the weak economy and stubbornly
high unemployment are shaping up to be key elements in voters’
choice between incumbent Democratic President Barack Obama and
Republican challenger Mitt Romney.
The Romney campaign was quick to call out the results as a
sign that Obama’s economic policies were not working.
“Business leaders have the gloomiest outlook in three years
and the President’s failed economic policies of higher taxes and
more regulations will only make things worse,” spokesman Ryan
Williams said in a statement.
The Obama campaign did not immediately respond to a request
for comment.
Businesses hope that politicians in Washington will be more
focused on solving economic problems after the election, when
they will be under less pressure to take harder-line positions
to satisfy donors and activists.
“Hopefully after the election in the U.S. there will be an
impetus to resolve some of these things that have been
unresolvable,” McNerney said.
To encourage that, the Roundtable is contemplating a wave of
post-election advertising to encourage policymakers to move
beyond impasse, said John Engler, the Roundtable’s president.
Engler, a former governor of Michigan, said the campaign’s
message would be: “Let’s start deciding things and move out,
because the world is pretty risky today. A lot of storm clouds
out there. We can lead but you can’t lead by not making
decisions.”
Investors will get a more detailed look at corporate
confidence next month when top U.S. companies including Alcoa
Inc, JPMorgan Chase & Co and General Electric Co
report quarterly results.
The Roundtable survey was conducted from Aug. 30 through
Sept. 14.
