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US CEOs more optimistic on hiring and sales, but still expect modest growth this year

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In this Thursday, June 12, 2014 photo, Marsha Lawson talks with a representative from CVS at the Cleveland Career Fair in Independence, Ohio. Optimism among chief executives of large U.S. companies has reached a two-year high, driven by greater optimism about hiring and sales. (AP Photo/Tony Dejak) (The Associated Press)

Optimism among chief executives of large U.S. companies has reached a two-year high, driven by a more positive outlook toward hiring and sales.

The Business Roundtable said Tuesday that its CEO outlook index rose to 95.4 in the second quarter, up from 92.1 in the first quarter. That is the highest level since the second quarter of 2012.

The positive sentiment among CEOs of some of the largest U.S. companies could bode well for hiring and growth. The U.S. economy has been adding jobs at a steady pace this year and the unemployment rate has fallen to 6.3 percent, a five-year low.

The proportion of CEOs expecting to hire in the next six months rose to 43 percent, up from just 37 percent in the first quarter.

Still, the outlook was not all rosy: the percentage of CEOs planning to invest more in their businesses fell to 44 percent from 48 percent.

Randall Stephenson, CEO of AT&T and chairman of the Roundtable, blamed the drop on the expiration of several investment tax breaks at the beginning of the year.

The decline is "troubling because of the high correlation between business investment and economic and job growth," Stephenson said.

The CEOs also forecast that the economy will grow at just a 2.3 percent pace in 2014. That would be better than last year's 1.9 percent growth, but below many economists' hopes at the beginning of this year that growth would reach 3 percent.

Growth this year has been dragged down by harsh winter weather, which closed factories and kept consumers away from shopping malls and car dealers in the first quarter. Many analysts expect the economy contracted at a 2 percent annual rate from January through March.

The International Monetary Fund, a global lending organization, lowered its forecast for U.S. growth this year to just 2 percent, from 2.7 percent, partly because of the weather impact.

The Federal Reserve is also expected to downgrade its economic projections for this year after a two-day meeting ends Wednesday.

The CEO survey was conducted between May 14 and June 4, and 131 of the Business Roundtable's 200 member CEOs responded.

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