By Jeffry Bartash, MarketWatch
WASHINGTON (MarketWatch) — The leaders of America’s largest companies are turning more cautious about the U.S. economy’s growth prospects.
The Business Roundtable on Wednesday said chief executives expect to spend and hire less over the next six months than they previously planned. The group’s economic outlook index fell to 89.1 in the second quarter from 96.9 in the first quarter — the first decline in nine months.
Top executives are increasingly worried about potentially big changes in U.S. tax and spending policies in 2013— the so-called fiscal cliff — as well as the spillover effects of the financial crisis in Europe.
The Roundtable’s chairman, Boeing BA -0.22% CEO Jim McNerney, said all the uncertainty is causing “paralysis” among businesses as the end of the year approaches. Some are even cutting jobs until they have a clearer idea of how the fiscal cliff and European crisis will be resolved.
“”We are being forced to trim employment in some places. A number of companies are doing that,” said McNerney, who is also a member of President Obama’s council on jobs.
The Business Roundtable represents companies with more than 14 million employees and $6 trillion in annual sales. Members include Wal-Mart WMT +0.56% , General ElectricGE +0.54% , AT&T T -0.42% , ExxonMobil XOM +0.19% and American Express AXP +1.07%
The Roundtable’s results dovetail with other surveys indicating businesses and consumers are less optimistic than they were just a few months ago.
A bevy of economic reports have shown that U.S. growth is decelerating, triggered by reduced consumer spending and a decline in hiring. A recession in Europe and a slowdown in China, both key export markets for U.S. companies, have also contributed.
Looking ahead, businesses are also worried about the prospect of large tax increases and sharp cuts in federal spending that are slated to take effect on Jan. 1, 2013 unless Congress changes the law.
McNerney say it’s harder for companies to make plans for hiring and capital spending unless they know what the tax rates will be. On the spending side, defense firms could be at risk since the cuts would largely take place in the military’s budget.
The Roundtable said most companies expect sales to rise in the next six months, but the number that forecast an increase fell 7 percentage points to 75%. Some 20% see no change and 6% predict a decline.
The number of companies that expect to raise investment spending in upcoming months fell to 43% in the second quarter from 48% in the first three months of the year. Forty-five percent predict no change.
Some 36% of the companies plan to hire in the next six months, down from 42% in the prior survey. About 44% expect no change in the size of their workforce and 20% plan to eliminate jobs.
The Business Roundtable’s main survey hit an all-time peak of 113.0 in the first quarter of 2011. The 10-year-old survey mostly ranged from the 80s to 90s before the 2007-2009 recession struck.
Readings above 50 indicate expansion; reading below that level reflect contraction.
Jeffry Bartash is a reporter for MarketWatch in Washington.
ECONOMY AND POLITICS | Economy and Politics page