CEOs see business outlook improving in U.S.

70 per cent expect business conditions to improve but predict unemployment will remain around 9.5 per cent
By By Scott Malone
|hrreporter.com|Last Updated: 02/18/2011

(Reuters) - Chief executives at major companies in the United States have a brightening view of business and economic conditions and look for the Federal Reserve to raise interest rates modestly this year, a survey by the Business Council found.

A strong majority — 70.4 per cent — of CEOs expect business conditions in their industry to improve over the next six months, the group said in a study conducted with The Conference Board and released on Thursday.

That represents a marked change from the last edition of the survey, in October, when just 34.2 per cent expected business conditions to improve.

The improvement reflected a surge in confidence about the U.S. economy, and a brightening of CEOs' views of Europe, while their confidence in China deteriorated. Just under 46 per cent expected Chinese business conditions to pick up over the next six months, compared with 49.3 per cent who expected that in October.

CEOs expect the Federal Reserve to leave its target funds rate steady at 0 to 0.25 per cent through June and then raise it by 0.25 percentage points to 0.5 percentage points by December.

The group's 124 members include the heads of some of the largest U.S. companies including Exxon Mobil Corp, General Electric Co and Bank of America Corp.

The group did not say how many of its members responded to the survey.

Their confidence did not extend to hiring, though. Fifty-one per cent said they expected to add workers in select areas, but respondents expected unemployment to remain elevated at 9.1 per cent to 9.5 per cent.

They did expect to pay their workers more, with 40 per cent expecting wage growth this year, up from 25 per cent who expected that in October. Thirty-five per cent look for prices to rise, up from the 26 per cent who did so in October.

Respondents also expressed concerns about rising state-government deficits, with 81.3 per cent agreeing that state deficits had become as big a concern as the U.S. federal deficit.

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