UPDATE 1-U.S. CEOs still not ready to hire, spend-survey

* Business Roundtable CEO Economic Outlook Index rises

* 51 pct of U.S. CEOs see sales rising in next 6 mos

* 40 pct expect to cut jobs in next 6 mos

* 35 pct expect to trim capital spending (Adds quotes, background)

By Scott Malone

BOSTON, Sept 29 (Reuters) - U.S. chief executives are not ready to step up hiring or capital spending, though a majority expect sales to rise over the next six months, according to a Business Roundtable survey released on Tuesday.

The survey said 40 percent expect to cut U.S. jobs over the next six months, compared with 13 percent who expect to add them. Some 35 percent expect to lower U.S. capital spending, more than the 21 percent who plan to raise it.

In a sign that they see the U.S. economy beginning to pull out of its worst downturn since the Great Depression, the majority -- 51 percent -- of CEOs expect their companies' sales to rise over the next six months.

"CEO's are beginning to see an uptick in expectations for sales, which is good; however, this demand has not yet translated into increased capital spending or hiring," said Ivan Seidenberg, chairman and CEO of Verizon Communications Inc (VZ.N), who also serves as chairman of the Roundtable.

Seidenberg said that an upturn in hiring would likely lag a resumption of growth in sales by about 12 to 18 months.

Caution was the dominant response on both hiring and spending, with the largest number of CEOs saying they expected their U.S. headcounts and capital budgets to remain flat over the next six months.

OUTLOOK FOR CONTRACTION

The Business Roundtable's quarterly CEO Economic Outlook Index rose to 44.9 in the third quarter, up from a reading of 18.5 three months ago, but below the level of 50 that separates growth from decline. It has been negative for a year.

The index has snapped back sharply from its record low of negative 5 hit in the first quarter.

CEOs expect real U.S. gross domestic product to decline 0.9 percent in 2009, up from their June view of a 2.1 percent decline.

Investors in recent weeks have become more convinced the U.S. economy is pulling out of a downturn, and the three major U.S. stock averages are now in positive territory year-to-date, though they are well below their pre-recession levels.

But Wall Street still has plenty to worry about, including an unemployment rate nearing 10 percent, leaving consumer spending, which accounts for the majority of U.S. economic activity, tepid.

Business Roundtable member companies, who were surveyed Sept. 2 to Sept. 18, employ more than 10 million people and collectively generate over $5 trillion in annual revenue. (Reporting by Scott Malone; Editing by Derek Caney)