Executives split over possible recession

American business leaders are split over whether the U.S. economy is headed for recession.

But most executives also say they are counting on the Federal Reserve to cut interest rates to spur the economy when policymakers meet today and on Wednesday.

Almost two-thirds of U.S. consumers said a recession is likely in the next year, and a majority said the economy is already faltering, according to a Bloomberg/Los Angeles Times poll taken Oct. 19-22. The survey showed the gloomiest view of the economy since February 2003.

Reason enough why Peoria, Illinois-based Caterpillar Inc., the world's biggest maker of bulldozers and excavators, says a recession is possible next year. Caterpillar cut its profit forecast on Oct. 19 because of the U.S. housing slump and said the economy would be "near to, or even in, recession" in 2008.

But while near-record oil prices, the housing plunge and mortgage defaults will cause the economy to slow, it won't slip into a recession, said executives including Joseph Moglia, chief executive officer of TD Ameritrade Holding Corp., the third-biggest online brokerage.

"The consumer is concerned about rising energy prices, what's going on in the credit cycle and the real estate market," Moglia said in an interview. "I don't believe they can have those concerns and not have some impact on what they're doing. That does not mean we're headed for a recession."

That's backed up by a majority of chief executive officers in a survey released Oct. 11 by the Business Council predicted U.S. growth will slump to 2 percent or less next year and that the economy will avoid a recession. The group includes the heads of Fortune 500 companies including American Express Co., Procter & Gamble Co. and General Electric Co.

A recession is two successive quarters of declining gross domestic product. Economists expect U.S. GDP to grow 1.8 percent in the fourth quarter and 2.5 percent in 2008, according to a Bloomberg survey. The economy grew 3.8 percent in the second quarter and the Commerce Department on Oct. 31 probably will report third-quarter growth of 3.1 percent, the survey showed.

For 2008, "we're assuming global GDP growth at about the same rate as 2007, strong agricultural business and no U.S. recession," DuPont Co. Chief Executive Officer Charles O. Holliday Jr. said in an earnings conference call Oct. 23. "We have no expectations of an uptick in demand from U.S. residential housing market this quarter or even next year."

Intel Corp. CEO Paul Otellini is even more bullish.

U.S. buyers of computers don't seem concerned about the economy, Intel Corp. CEO Paul Otellini said in an interview on Oct. 23.

"People are buying notebooks like they're hotcakes, and companies tend to invest in technology in downturns," Otellini said. Sales to non-U.S. markets will make up for any reduction in U.S. consumer spending during a slowdown, he said.

"I am very optimistic on some of the actions taken recently, like the Fed," Alan Mulally, CEO of automaker Ford Motor Co., told reporters in Wayne, Michigan, on Oct. 15. "Hopefully, the subprime will improve and housing will stabilize again. We also have a good, growing U.S. economy. There's a lot to be positive about."