ANF did not sound all that positive.
and this proves the disconnect from the pumpsters and reality...
CEOs have gloomy outlook for US economy
By Alan Beattie in Washington
Published: November 12 2002 19:50 | Last Updated: November 12 2002 19:50
Executives from some of America's leading companies are expecting to cut jobs and delay investment over the coming year, in the latest sign that the US economic recovery is struggling to gain momentum.
Their gloomy sentiment, revealed in a survey by an association of chief executive officers, contrasted with upbeat comments from Paul O'Neill, US Treasury secretary, on Tuesday.
But it coincided with more gloomy news from Japan, where the government has downgraded its assessment of the economy for the first time in a year, setting the stage for the fiscal taps to be opened with the compilation of an extra budget and the abandoning of a Y30,000bn cap on bond issuance.
And in Germany, fears increased that the economy might be on the brink of a second recession in less than 12 months after a leading indicator of business confidence collapsed.
In Washington, Mr O'Neill said: "The objective data don't seem to support the idea that we're going down." He cautioned against expecting large tax cuts in the short term to boost the economy.
The Business Roundtable, an association of 150 CEOs whose companies employ over 10m workers, said a survey of its membership showed that 60 per cent of respondents were expecting to cut jobs next year against just 11 per cent who said employment in their companies would grow. More than 80 per cent said they expected to hold or cut capital expenditure over the coming year.
"This survey raises serious concerns for America's workers, companies and overall economy," said John Dillon, chairman and chief executive of International Paper and chairman of The Business Roundtable. He said the state of the economy justified additional fiscal stimulus, and denied that CEOs were in an irrational state of despondency.
"It has nothing to do with mood or lack of confidence. It is to do with the fundamentals of orders, operating rates, profitability and cash-flow."
The Federal Reserve has said that a revival in business investment is key to strengthening the recovery.
The Fed on Tuesday released its regular survey of senior loan officers at banks in the US. Respondents said that the demand for loans from companies had continued to slide over the last three months, driven by a lack of business investment.
Despite fears of a credit crunch, the Fed said that the reduced demand from creditworthy borrowers, rather than a tightening in credit standards, was the main reason for the fall in loans.
Mr O'Neill said the economy was fundamentally sound and that a package of tax changes currently being considered by the administration should target areas of weakness rather than deliver a broad-based stimulus. His comments were the first public statement by a member of the administration's economic team since the election to counsel against expecting a large tax cut next year.
The administration must "make sure that as we take intervention actions that we're still comfortable with a sustainable path for fiscal policy going forward," Mr O'Neill said. "We need to make sure we don't make the long term a casualty of the short term."
The Treasury has focused on long-run reform of the tax system, including possible changes to corporation taxes, which is likely to take several years. Mr O'Neill on Tuesday said that no decisions as yet had been taken on what changes would be proposed, saying that there was a "continuous conversation" with President George W. Bush on tax reform.
The Japanese government's revision to its forecasts on Tuesday came ahead of figures on Thursday for third quarter gross domestic product. The data are expected to show growth contracted from the previous quarter's 0.6 per cent to around 0.4 per cent because of a decline in exports.
The combination of the economic downgrade and the release of the GDP figures allows the the government to make a credible case for more spending despite its repeated pledges to impose fiscal discipline and reduce public works spending.
The adoption of an extra budget would spell the end of a promise by Junichiro Koizumi, prime minister, to cap bond issuance at Y30,000bn, although it is a sacrifice he appears ready to make in return for the accelerated disposal of banks' bad loans.
Additional reporting by David Ibison in Tokyo |
