US chief executive officers trim outlook amid turmoil

The top executives of America's largest companies have grown more cautious about the economic outlook, according to a survey released on Monday by the Business Roundtable, but they still expect growth despite the turmoil in the world's credit markets and what it characterised as the "recession" in US housing.
The group said its CEO Economic Outlook Index - a measure of executive sentiment - 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.
Their forecast of US gross domestic product (GDP) growth this year also declined, according to the survey. The CEOs now expect 2.4 percent GDP growth in 2007, down from an earlier forecast of 2.6 percent.
During a conference call with reporters, Harold McGraw III, the group's chairman and the president of The McGraw-Hill Cos Inc, characterized the deterioration in CEO sentiment as "a slight dip." He said it reflected expectations the US economy would "settle into a pattern of softer growth," despite what he acknowledged was a "recession" in the US real-estate market.
The quarterly report came out just hours after former US Federal Reserve Chairman Alan Greenspan said the risks of a US recession had increased. The biggest risk, Greenspan said, would be a substantial fall 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 "were more positively disposed that it will not spread."
Indeed, the majority of CEOs polled - 68 percent - said they expected their companies' sales to rise over the next six months. But only 33 percent said they expected to increase their US staffing over the next six months, and only 35 percent said they expected to raise their capital spending over that period.
The Business Roundtable is an association of the top executives of 159 US companies that together employ 10 million workers and generate $4.5 trillion in annual revenues. The survey was conducted from August 20 through September 5.