NEW YORK (Reuters) - Chief executive officers of large U.S. companies are much more optimistic about the economy than a few months ago, although their expectations for growth remain modest, according to a quarterly survey by the Business Roundtable.
The Roundtable's economic outlook index jumped to 101, its highest level since the first quarter of 2006 and up from 86 three months ago. At its record low in early 2009, the index stood at negative-5.
More CEOs than last quarter -- 80 percent -- expect their sales to increase over the next six months, and about six out of 10 expect to boost capital spending. Fewer than half -- 45 percent -- will hire more workers, but that figure is up from 31 percent three months ago.
"When demand increases, capital expenditures and employment follow, which is what we expect to see in the next six months," said Ivan Seidenberg, chairman of the Business Roundtable and CEO of Verizon Communications Inc.
The Roundtable, an association of U.S. CEOs who run companies with about $6 trillion in annual sales and 12 million workers, polled its members in November and the first few days of December.
Its survey of 137 CEOs follows several recent signs that an economic recovery is gathering steam, even though unemployment remains high.
Retail sales increased for a fifth straight month in November, as consumers snapped up clothing and other items at the start of the holiday season. Sales for October were revised up. Consumers also spent on non-essential goods, lifting sales at sporting goods and book and music stores by the most in almost a year.
MODEST GROWTH EXPECTED
The executives' improved confidence comes despite modest expectations for U.S. economic growth. On average, business leaders expect the economy to expand by 2.5 percent in 2011, only slightly better than the 1.9 percent expansion anticipated for 2010.
The forecasts come as many large U.S. companies have been setting their 2011 expectations, which in some cases predict milder GDP growth next year.
United Technologies Corp said last week a U.S. economic recovery will hinge on a pickup in consumer spending, which has been hampered by "elusive" job growth.
The diversified U.S. manufacturer set a forecast range that implied 7 percent to 14 percent profit growth from estimated 2010 levels, as it expects overall global economic growth to slow next year.
"As I think about 2011, I feel a lot better than I've felt in the last two years, in terms of what's going on in the global marketplace," said Greg Hayes, chief financial officer at United Technologies.
The Obama administration's recent agreement to extend Bush-era tax breaks should help consumer sentiment, Hayes told investors on Tuesday, while the world's largest maker of elevators and air conditioners looks for demand in Asia to continue "to grow nicely."
Hayes' biggest worry is the possibility of further debt crises in Europe. "If something were to happen in the euro zone, with the common currency, that could have an impact," Hayes said.
3M Co. said it faced macroeconomic challenges in the United States and Western Europe and warned persistently high unemployment and a high consumer savings rate would hold down results in its home market.
General Electric Co, the largest U.S. conglomerate, will provide its 2011 "framework" at an analyst meeting later on Tuesday. Analysts expect GE profit to rise about 13 percent in 2011 as the company shakes off a brutal downturn.
The Roundtable also asked members about cost pressures. It found 29 percent were concerned about materials like copper and other metals, as well as healthcare and labor costs.
Producer prices rose more than expected last month, another potential sign of reviving economic activity. For a graphic, see r.reuters.com/bys99q