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To: Kelvin Taylor who wrote (43766)	10/6/2002 9:54:43 AM
From: Kelvin Taylor	Read Replies (2) \| Respond to of 53068

CEOs See Slower Growth on Horizon Sun Oct 6, 9:15 AM ET By Jeremy Pelofsky and Brian Kelleher WHITE SULPHUR SPRINGS, W. Va. (Reuters) - Top U.S. executives expect slower economic growth in the months and year ahead and, while not expecting a new recession, think capital spending will at best stabilize or perhaps fall further, according to a survey out on Wednesday. About 94 percent of the chief executives surveyed by the U.S. Business Council expect economic growth to slow in the second half of 2002 from the 3.2 percent tallied in the first half of the year. And almost two-thirds, or 65 percent, expect that growth will fail to top 3 percent next year. "Chief executives of some of the nation's largest companies do not expect a new recession, but do anticipate slower economic growth through 2003, as well as stable or higher inflation and slower profit growth among U.S. companies next year," the Business Council said. The elite chief executives of companies like McDonalds Corp. , Hewlett-Packard Co. and Goldman Sachs Group Inc. who belong to the U.S. Business Council, were gathering at the posh Greenbrier resort nestled in the mountains of West Virginia for a semi-annual discussion about the economy and security. Oh yes, and a round or two of golf. The U.S. economy began recovering late last year but the recovery has been uneven, with annualized growth of 5.0 percent in the first quarter dwindling to a rate of 1.3 percent in the second. The economy contracted in the first three quarters of 2001, ending a record decade-long expansion. One key cloud on the economy's prospects is the persistent gloom in the boardroom and the reluctance of many companies to increase capital spending. The vast majority of CEOs expect capital spending to stabilize or drop next year. Some 65 percent of executives expect wages to remain stable next year, while 31 percent expect wage gains to slow. About 40 percent of executives expect the pace of hiring to remain stable, with only 19 percent predicting workforce reductions. But 79 percent of respondents said unemployment, currently 5.7 percent, will rise next year. Yet, those executives were more upbeat than many analysts about their sales outlook. More than half of respondents believe their company's sales will grow "somewhat" or "notably" in the coming year. OPINIONS ON FED RATES MIXED More than half of the 75 chief executives surveyed believed the Federal Reserve was done cutting interest rates and almost all of them believed Fed policymakers would begin raising rates again next year. But still a large minority -- 40 percent -- are holding out hope that the Fed will add to last year's 11 rate reductions but do not expect a cut of more than 25 basis points. CEOs expect government spending and consumers to drive the U.S. economy over the next year, while business capital spending and commercial construction would lag. COSTS THE FOCUS Executives don't believe their long-constrained power to raise prices has much chance of improvement -- only 21 percent think it will increase -- but about 80 percent are expecting stable or rising profit margins. Nonexistent or decelerating wage gains and cost cuts are the primary reasons for that optimism. Energy costs, however, are expected to crimp the bottom line, as 59 percent of respondents expect those to rise. Half of the CEOs said they have delayed or altered business plans because of the stock market's dreadful performance, and 30 percent said they had changed their long-term strategy because of stock values, which have tumbled amid the weak recovery, geopolitical events and concerns over corporate scandals. Nearly all CEOs in the survey said their companies had not changed business plans because of new corporate governance legislation, which has included the certification of financial reports by CEOs and chief financial officers.