U.S. chief executives have become slightly less optimistic about the economy in the past quarter, but half plan to increase capital spending in the next six months, according to a survey released on Wednesday.

The Business Roundtable's (search) Economic Outlook Index slipped to 98.9 in the December survey from a high of 101.7 in September, reflecting a somewhat less robust employment outlook, a dip in the sales outlook, as well as higher oil prices.

"Overall, while CEOs are forecasting continued solid growth for the next six months, they expect a slight easing from the high recovery growth seen in 2004," said Hank McKinnell, chairman of Business Roundtable and chairman and CEO of Pfizer Inc. (PFE) in a conference call.

Business Roundtable, a group of CEOs from large U.S. companies, said the survey-- conducted in the first two weeks of November -- found executives expect gross domestic product growth of 3.5 percent in 2005, compared with 4 percent in 2004.

"While CEOs expect the next six months to be slightly less bullish than 2004, CEOs are optimistic fundamentals remain strong and investment spending will continue to drive growth in first-half of 2005," McKinnell said.

About 40 percent of those surveyed expect employment to increase, just as in September, but 20 percent of CEOs in the December survey expect fewer jobs in the next six months compared with 12 percent in the previous survey.

Half of the CEOs expected to increase capital spending, but McKinnell said the expiry of tax breaks this year is a concern and will be watched closely to see if spending dips in the second half of 2005.

Health-care costs topped the list of CEO concerns, followed by litigation costs and rising energy and raw material prices.

"What's offsetting cost pressures is productivity," McKinnell said. "While there wasn't a specific question in the survey, there probably is more pricing flexibility than a year-ago. But it's still very difficult to get prices up."

The growing budget deficit is also a concern, he added.

"Now as we see a return to healthier sustained economic growth, even though we are not at full employment, we must turn our attention to the long-term impact of spending and the potential pressure deficits could put on our financial markets," he said.

The weakening dollar will likely be a short-term positive for Roundtable members, but it is a "storm cloud that could be gathering on the horizon" and an indication there needs to be a focus on fundamentals related to the deficit, McKinnell said.

The December survey was completed by 131 of the Roundtable's 160 member companies.