Executives from leading US firms are expecting to cut jobs and delay investment over the coming year, in the latest sign that the US recovery is struggling to gain momentum. Their gloomy sentiment, revealed in a survey by an association of chief executive officers, contrasted with upbeat comments yesterday from US Treasury Secretary Mr Paul O'Neil.

But it coincided with more bad news from Japan, where the government has downgraded its economic assessment for the first time in a year, setting the stage for the fiscal taps to be opened with the compilation of an extra budget and the abandoning of a 30,000 billion yen (€247 billion) cap on bond issuance. And in Germany, fears increased that the economy might be on the brink of a second recession in less than 12 months after a leading indicator of business confidence collapsed. In Washington, Mr O'Neill said: "The objective data don't seem to support the idea that we're going down." He cautioned against expecting large tax cuts in the short term.

The Business Roundtable, an association of 150 chief executives whose firms employ more than 10 million, said a membership survey showed 60 per cent were expecting to cut jobs next year against just 11 per cent who said employment in their firms would grow. More than 80 per cent expected to hold or cut capital expenditure over the coming year.

"This survey raises serious concerns for America's workers, companies and overall economy," said Mr John Dillon, chairman and chief executive of International Paper and chairman of The Business Roundtable. He said the state of the economy justified additional fiscal stimulus, and denied that chief executives were in an irrational state of despondency.