BOCA RATON, Fla - Leaders of the largest U.S. companies are growing more confident that economic growth will accelerate in 2004, yet less than half have plans to speed up hiring.
The survey, released on Wednesday, of about 70 chief executive officers by the Business Council suggests that companies remain in some respects reluctant to spend, more than two years after the U.S. economy climbed out of recession.
"Companies are still cautious and not wanting to commit to new workers," said Gary Thayer, chief economist of A.G. Edwards & Sons Inc. "They're still uncertain about the sustainability of the recovery."
Most CEOs expect the economy to gather steam. Seventy-six percent expect gross domestic product in 2004 to rise between 3.6 percent and 4.5 percent, up from 3.1 percent in 2003. Just 55 percent of those polled in October expected a 2004 increase exceeding 3 percent.
Nevertheless, just 31 percent plan to increase their own hiring pace in 2004, although that is more than twice the 14 percent who said so in October.
Forty percent plan to increase U.S. hiring, after 27 percent reported increases in 2003. Just 19 percent plan to reduce hiring inside the United States. Fifty-four percent reported shifting U.S. jobs outside the country in the past year.
January's unemployment rate fell to a two-year low of 5.6 percent, but the economy has added only about 73,000 jobs a month since September. Economists say 150,000 monthly job additions are needed to keep the unemployment rate steady.
Eighty-three percent of CEOs expect the unemployment rate to fall to between 5 percent and 5.5 percent, while 13 percent expect little change.
Consumer prices should remain tame in 2004, the executives said. Seventy-eight percent expect core prices, which exclude food and energy, to rise between 1.1 percent and 2 percent this year. Deflation is not a concern, the executives said.
PROFITS SEEN RISING
The CEOs overwhelmingly expect U.S. stocks to rise again in 2004, fueled partly by rising corporate profitability. Eighty-six percent expect major stock market indexes to rise, most likely modestly, while only 2 percent expect declines.
Nearly two-thirds of the CEOs said they expect profit at their companies to be higher this year than in 2003, while 10 percent expect declines. Most also expect higher sales.
The vast majority of CEOs, 95 percent, expect the Federal Reserve to tighten monetary policy. The central bank's overnight lending rate is 1 percent, its lowest since 1958.
Two-thirds of the executives expect the rate to end 2004 no higher than 1.5 percent, while nearly one-quarter expect an increase to between 1.6 percent and 2 percent.
"The Fed is trying to make it clear they will be patient in raising rates," said Thayer. "That's making companies feel a little better about things, but they would feel better if consumer confidence were stronger. That may be a matter of time."
About one-third of CEOs expect the dollar to modestly extend its recent declines against the euro and the Japanese yen, while slightly more expect the greenback to steady. Eighty-four percent favor lowering trade barriers.
The Business Council, which has 121 members, is meeting at the Boca Raton Resort & Club, where CEOs can swim, play golf, play tennis, or make use of a 32-slip marina as they discuss business trends.
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