Butler News

440 words
1 November 2007
07:30
Reuters News
English
(c) 2007 Reuters Limited

NEW YORK, Nov 1 (Reuters) - One-quarter of U.S. chief executives see a better-than-even chance of recession in the next 18 months, according to a survey released on Thursday.

A monthly CEO confidence index fell 3 points in October to 127.5 points, its lowest level since July 2003, amid concerns about the effects of a subprime mortgage crisis, a weak U.S. housing market, and record oil prices.

The latest level compares to a base of 100, when the index was launched in October 2002. Its trough of about 89 points was in April 2003, and the index peaked at about 182 points in January 2006.

It was the third consecutive monthly decline in the five-year-old survey by Chief Executive Magazine. A year ago, its index was at 156.8 points, and at 169.3 as recently as July. "CEOs' optimism has gone markedly south since the July time period, when the credit crunch started," said Ed Kopko, publisher of the magazine. "What's stunning is we had the Fed rate cut in September, but confidence continued to go down."

The poll was conducted between Oct. 8 and Oct. 19 and included 536 executives, all but a handful based in the United States. The index was compiled before the latest Federal Reserve interest rate cut on Wednesday. Twenty-five percent of CEOs said the likelihood of a recession in the next 18 months is greater than 50 percent, while 42 percent said they saw a 25 percent or lower chance of recession, the survey said.
Business leaders cited a weak U.S. dollar and the national debt as other areas of concern. They also said they are becoming more conservative in their planning. About 28 percent plan to cut capital spending over the next quarter, up from 22 percent in the previous survey.

CEO attitudes serve as a predictor on the direction of the broader economy and suggest U.S. employment will soften by the first quarter of 2008, Kopko said.
"They're not suggesting any kind of deep recession right at this moment, more of a flattening," he said. But responses to the survey do contrast with optimism shown by stock investors in recent weeks.

"I think if you're a stock investor you have to start wondering if the stock market is overly optimistic compared to where the CEOs are. It's not the stock market that creates employment or business investment." (Reporting by Nick Zieminski)