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Surprise! CEOs Aren't Too Worried About Economy

Reuters
Tuesday, 4 Dec 2007 | 2:07 PM ET

U.S. chief executives' view of the economy improved in the fourth quarter, although they have
become far more concerned about energy prices than they were a year ago, according to a survey by the Business Roundtable.

The group said its quarterly CEO Economic Outlook Index rose to 79.5 in the quarter, from 77.4 in the third quarter. It is below the 81.9 reading in the fourth quarter of 2006. Anything above 50 indicates growth.

Cash Register
Paul Sakuma
Cash Register

The reading suggested that, even with the United States two years into a housing slump and with businesses facing a credit crunch and high energy prices, CEOs are expecting a controlled slowdown in growth, a Roundtable official said.

"America's CEOs are expecting the economy to continue in a pattern of softer growth," said Harold McGraw, chairman and chief executive of McGraw-Hill Companies, who also chairs the Business Roundtable.

"People keep waiting for shoes to drop and you do have a housing recession and you do want to watch if there could be any spillover effect from that, which we have not really seen,"
McGraw said on a conference call with journalists.

CEO Survey
A survey on business leaders' thoughts on the state of the economy, with CNBC's Michelle Caruso Cabrera

"CEOs are getting a little bit more comfortable that we are slowing down a little bit as an economy," he added. "But there aren't huge dark clouds out there. But again, we have to pay attention to the consumer and the consumer behavior patterns.

The cost of health care and energy topped their list of cost worries, with twice as many CEOs citing energy as their main worry than a year earlier.

Oil prices hit record highs near $100 last month before falling back below $90 on concerns a slowing economy would crimp demand. U.S. light crude oil futures were trading at $87.56 Tuesday.

High energy prices and slowing growth are taking a toll across the economy. Delta Air Lines warned Wall Street Tuesday that those factors would take a toll on its results, while rival Southwest Airlines Co said it was cutting back capacity growth plans.

CEOs expect U.S. gross domestic product to rise 2.1 percent next year. It was their first forecast of 2008 GDP.

Fifty-one percent of respondents did not expect to change their capital spending plans over the next six months and 45 percent -- a plurality of respondents -- expect their company's
U.S. employment to remain flat.

The survey, conducted between Nov. 5 and Nov. 20, took the pulse of 105 of the group's 160 member companies. Collectively, Roundtable members generate $4.5 trillion in annual revenue.

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