WASHINGTON: Chief executives at top US companies expect a weaker economic performance this year than in 2002, and many believe they will need to reduce payrolls over the next six months, a new survey has found.
According to the survey by the Business Roundtable, whose member companies have a combined workforce of 10 million and US$3.7 trillion in revenues, CEOs expect US gross domestic product to advance just 2.2% this year, a bit less than the sluggish 2.4% gain registered in 2002.
In addition, only 9% expect to employ new staff, while 45% expect to let workers go.
“What we’re seeing is a continuing trend of a weakening economy,” said Business Roundtable chairman John Dillon, who is also chairman and CEO of International Paper.
“This economy continues to operate well below its potential and continues to be of serious concern to us. We’re teetering someplace right on the brink of negative numbers,” he said.
In the business group's previous survey released in November, 71% of the responding companies had looked forward to higher sales this year, even though 60% expected employment to fall.
The latest survey showed executives slightly ratcheting back their forecasts for economic growth, which the November poll had put at 2.4%. It also showed that companies remained reluctant to increase capital spending.
Of the respondents, 27% said they expected to reduce investment spending over the next six months, while only 18% planned to raise it.
A collapse in business spending on plants and equipment led the US economy into recession in early 2001. Economists say a pick-up in business investment is needed to ensure a broad-based, sustainable recovery.
Dillon cautioned, however, that US businesses were still operating with ample capacity, suggesting capital spending was unlikely to rise without a pick-up in consumer demand.
Executives responding to the survey identified consumer uncertainty stemming from the war in Iraq and the related worry about terror attacks as the biggest economic challenge.
Asked if the economy might pick up now that the US-led war in Iraq appeared to be entering its final stages, Dillon said that while some rebuilding of inventories might be expected, a more fundamental strengthening may be lacking. “The fundamentals we are talking about here are largely not war-related (and) therefore we continue to be very concerned,” he said.
For this reason, Dillon added, passage of President George W. Bush’s US$726bil tax-cut plan was important, adding that the business group would press hard for its central feature – the elimination of taxes on corporate dividends. – Reuters