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CEOs Positive Despite Fears of Recession

Despite a variety of headwinds dominating the US economic scenario, American business leaders assume and foresee generally positive conditions over …

Despite a variety of headwinds dominating the US economic scenario, American business leaders assume and foresee generally positive conditions over the next six months.

A Business Roundtable CEO Economic Outlook survey released early this month, indicated that majority of CEOs were confident of a moderate economic growth of 2.1 percent in 2008, despite fears of an impending economic recession. This finding can be rated as an improvement in the CEOs confidence, which was otherwise found to be consistently declining as per the Chief Executive Magazine’s October CEO confidence index. The CE index had recorded a decline in the CEO confidence survey conducted between October 8th and 19th.

The Business Roundtable’s CEO Economic Outlook Index, – considered as a measure of CEO sentiment – rose slightly to 79.5 in November, up from a 77.4 reading in a September poll. Anything above 50 suggests economic expansion, and anything under 50 is a sign of economic contraction. The survey  - from Nov. 5 to Nov. 20 – completed by 105 top executives, showed positive signs that sales and capital expenditures should increase in that time period.

In an interview with CNBC, Harold Mc Graw, chairman of the Business Roundtable and CEO of The McGraw-Hill Companies said that the prevailing sentiments were very much applicable to the near future as well. “These sentiment will remain for sometime,” he said.

“This quarter’s survey suggests that CEOs, as a whole, still see the economy as steady and that the vast majority expect their sales, capital spending and employment levels to either increase or remain steady in the first half of 2008,” Harold McGraw said.

In a response to the question on cost pressures facing their businesses, a majority of CEOs said they were concerned about energy and health care expenditures, equally, as their greatest fiscal pressures. “Though there’s only a slight expansion of this quarter’s index, CEOs’ are banking on the underlying strength of the economy, which has endured increased energy costs and credit concerns,” the report said.

Of the total CEOs polled, an equal number (32 percent) of them identified each health care and energy costs as the major cost pressures. “For the last four consecutive years, health care costs, which impact virtually all Roundtable companies, have been cited as the top pressure. But now, with oil approaching $100 a barrel, energy costs have risen to the top concern in CEOs’ minds,” noted McGraw.

According to the report 70 percent of the CEOs predict that sales will increase, while 17 percent said sales would stay the same and 13 percent forecast sales would decline. 35 percent of the polled CEOs said they foresee increased capital expenditures, while 14 percent said the capital expenditure would decline.

On the staffing and employment side, 33 percent believed their U.S. staffing requirements would increase over the next six months, while 45 percent expected similar levels and 22 percent saw a decrease.

Business Roundtable is a Washington, D.C.-based group, which is an association of chief     executive officers of about 160 leading US corporations representing a combined workforce of more than 10 million employees and $4.5 trillion in annual revenues.

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