CEOs to investors: relax!

By Ben Klayman

NEW YORK (Reuters) - Panicked investors need to relax. The U.S. economy may be slowing, as evidenced by numerous reports, but it is slowing to a lower growth rate, not a recession, top manufacturing executives said at the Reuters Manufacturing Summit in New York this week.

Throw in strong demand overseas and the sell-off in the U.S. markets is overdone since any slowdown is confined to such sectors as housing and automotive, they said.

"Our best expectation is we're going to have a 1995-like soft landing," Caterpillar Inc. (CAT.N: Quote, Profile, Research, Stock Buzz) Chief Executive Jim Owens said.

"A day's fluctuations on the stock market doesn't change my view," he added on Tuesday as U.S. stocks plummeted, sending the benchmark Dow Jones industrial average .DJI to its biggest one-day point drop since just after the September 11, 2001, attacks.

Despite inflation worries among some investors, Owens expects the U.S. central bank to begin cutting interest rates toward the end of the year and he sees a "pretty strong" U.S. economy in 2008.

This week, reports on new orders for U.S.-made durable goods, new home sales, Midwest manufacturing and a downward revision to the fourth quarter U.S. gross domestic product pointed to weakness.

Nevertheless, manufacturing executives at the summit said the U.S. economy is fine, especially the heavy capital goods sector. To bolster their argument, the Institute for Supply Management on Thursday reported U.S. factory activity rose more than expected in February, lifted by growth in new orders, production and employment.

"The bell that's tolling over the U.S. economy this year is tolling very incorrectly," Timken Co. (TKR.N: Quote, Profile, Research, Stock Buzz) CEO Jim Griffith said.

He acknowledged, however, that there are some sectors where things are tough.

"I would hate to be in the house building business right now," Griffith said.

Even in that sector, though, things have bottomed out, Ingersoll-Rand Co. Ltd. (IR.N: Quote, Profile, Research, Stock Buzz) CEO Herb Henkel said.

"We're clearly coming out of bottom of the U going forward, and the question in my mind gets to be how steep is the slope," he said. "I'm not ready to declare victory yet, but directionally I would say we are at least at the activity level we were seeing going into this year."

Burlington Northern Santa Fe Corp. (BNI.N: Quote, Profile, Research, Stock Buzz) CEO Matt Rose said the U.S. railroad sees a stronger second half for the economy, driven by a recovery in housing.

In last year's fourth quarter, Burlington Northern had a "strong" auction for lumber cars, which sometimes indicates expected housing construction activity six to nine months in advance, he said.

To offset the near-term housing weakness, the U.S. commercial construction market will remain strong for at least another six to nine months, said Dennis Sadlowski, chief operating officer of Siemens AG's (SIEGn.DE: Quote, Profile, Research, Stock Buzz) U.S. energy and automation business.  Continued...