Corporate America taking grimmer view of economy

By Scott Malone

BOSTON (Reuters) - Corporate America's view of the U.S. economy has grown bleaker, weighed down by surging energy prices, a credit crunch and the worst housing slump in decades, according to two surveys released on Wednesday.

The polls showed the anxiety about the economy that has already spooked Wall Street -- the Standard & Poor's 500 index .SPX is down 9 per cent this year -- has spread to the corner offices of chief executives and chief financial officers, who expect to cut jobs to cope with rising costs.

The Business Roundtable's quarterly CEO Economic Outlook Index tumbled five points to 74.5, its lowest level since October 2003.

"Clearly, we've got a more gloomy scenario" than in the first quarter, said Harold McGraw, chairman of both publisher McGraw-Hill Cos Inc (MHP.N) and the Roundtable.

"People are being very cautious, very cost-control oriented," McGraw told reporters on a conference call. "It's just the confluence of a lot of things that make people somewhat fearful."

The drop in the CEO index was the sharpest in almost two years. In September 2006 it tumbled 16.2 points to 82.4. Any reading above 50 indicates growth.

The survey found CEOs had also cut their forecast for overall U.S. economic growth. They now expect gross domestic product to rise 1.3 percent in 2008, down from a prior forecast of 1.5 percent.

Thirty-one percent said they expect their companies' U.S. headcount to fall over the next six months, while 28 percent expect it to rise. In the first quarter, 22 percent of CEOs had expected their staffing levels to decline.

Sixty-eight percent said they expect their sales to rise over the next six months, while 52 percent forecast flat U.S. capital spending at their companies over that period.

The poll, conducted in the period May 22-June 9, included responses from 110 of 160 member companies. Together, Roundtable firms generate $4.5 trillion in annual revenue.

CFOs ALSO GRIM

Another survey, of chief financial officers, showed they had a similarly grim view of the economy.

Seventy-one percent said the U.S. economy will not begin to rebound until 2009, and most said recovery will not come until mid-2009 at the earliest, the Duke University/CFO Magazine Global Business Outlook survey found. The 1,000 CFOs polled cited high fuel costs and weak consumer demand as their top worries. They also forecast a drop in employment.

"This could be the longest slowdown since the double-dip recession of 1979-81," said John Graham, director of the survey and a finance professor at Duke's Fuqua School of Business.

The surveys join a stream of negative economic news.