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Wednesday, September 06, 2006 CEOs in U.S. Less Confident About Economic Growth, Vistage Says

The economy sucks, but don't take my word for it. --pseudolus
By Courtney Schlisserman

Sept. 6 (Bloomberg) -- Confidence about the U.S. economy among chief executive officers at small and mid-sized companies declined in the third quarter, a survey by Vistage International showed today.

The San Diego-based group's confidence index fell to 89.3 during the quarter from 97.8 the prior three months. The level is the lowest since the organization, which represents 13,000 companies that generate almost $300 billion in annual revenue, started its survey in the second quarter of 2003. "Read More" click link below


``The chief executives in this country are saying the economy is worse than it's been, and, if they look over the next 12 months, they think it's going to worsen,'' Dan Barnett, chief operating officer at Vistage, said in an interview from New York. ``However, they do really view it as looking like a soft landing to them.''

Executives surveyed were less optimistic about revenue growth, and one-third said they'd have to absorb higher costs. About half said they expected to raise prices. The results reinforce economists' expectations that the cooling housing market will drag down consumer spending and economic growth the rest of this year and early next.

Thirty-two percent of the 1,939 survey respondents said that economic conditions worsened over the past year, compared with 19 percent who said so in the second quarter. It was the first time in three years that this measure increased.

The CEOs' view of current economic conditions fell to 94 in the third quarter from 125. The expectations index fell to 84 from 101.

Revenue Outlook

The dimmer outlook was also reflected in executives' views on revenue, profit and spending. The index of expected revenue growth fell to 167 from 171, and expected profit growth declined to 144 from 152.

``Executives are still continuing to expect to see growth in profits and revenue and expect to continue to invest in fixed assets,'' Barnett said. ``It's just not going to be as good an environment as the last year to two years.''

Less than half of the CEOs in the survey, 45 percent, said they'd increase capital spending. In the second quarter, 51 percent said they would.

Economic growth probably will end this year at an annual rate of 2.7 percent, less than half the 5.6 percent pace recorded the first three months of 2006, according to a Bloomberg survey of economists taken from July 28 to Aug. 11. The same survey showed consumer prices increasing at a 3.4 pace at the end of the year, before slowing in the first three quarters of 2007.

Fed's Poole

The inflation situation is ``well controlled,'' Federal Reserve Bank of St. Louis President William Poole said in an interview on Sept. 5. ``I think it's going to work its way down -- not next month, but over a period of some months and maybe even some quarters.''

Fed policy makers last month left the target for the overnight lending rate between banks at 5.25 percent, ending a series of 17 consecutive quarter-point increases over two years.

While materials costs are a concern, executives indicated they are most worried about hiring and retaining qualified employees. One-third of respondents said finding qualified workers was their top concern. Eight percent said they would reduce their workforce.

Vistage's index of employment expectations fell to 149 in the third quarter, from 152 in the second.

Vistage is a membership organization representing chief executives of small and mid-sized companies around the world that employ more than 2.1 million people, according to the group's website. It surveyed members for this poll from Aug. 16 to Aug. 24, and the results had a margin of error of 1.9 percentage points.

To contact the report on this story: Courtney Schlisserman in Washington
Last Updated: September 6, 2006 00:15 EDT

and from

As an aside, a study published by the Labor Department shows that entry-level wages for college and high-school grads fell by more than 4% in real terms from 2001 to 2005. Entry level wages for male college grads dropped 7.3%. This reinforced the message last week by the Census Bureau, which revealed a 5.9% slump from 2000 to 2005 in median income for families with at least one parent aged between 25 and 34. No wonder we had such a wave of no-doc and option-ARM loans to entice folks into the housing market this cycle – if this was a cycle that demanded some form of down payment upon purchase, we never would have enjoyed this record housing boom (and now we are about to endure its after-effects).


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