March 12 (Bloomberg) -- The U.S. economy is in a prolonged contraction that will not dissipate until next year, according to a survey of chief financial officers.

More than half of the executives surveyed said the world's biggest economy is already in a recession and eight out of 10 said one is likely by the end of this year, according to the first-quarter Duke University/CFO Magazine Business Outlook index. The gauge was at the lowest level since its inception in June 2001, when the U.S. was in an eight-month contraction.

``The news from CFOs is pretty grim,'' John R. Graham, director of the survey and a finance professor at Duke, said in a statement. ``With overwhelming CFO pessimism, we expect weak capital spending and employment in 2008.''

A slowdown in consumer spending, credit restrictions, fallout from the deepening housing slump and high fuel prices were all cited as contributing to the decline in growth. Nine out of 10 company leaders said a recovery will not begin until next year, with a plurality forecasting a rebound late in 2009.

The results are based on responses from 475 U.S. chief financial officers in a survey taken through March 7.

A third of the respondents said their businesses had been ``directly'' affected by decreased availability of credit, having to pay 1.18 percentage point more on average for financing than in the last three months of 2007.

Three-quarters of the finance chiefs said the Federal Reserve's interest-rate reductions that started in September have had no influence on their businesses.

`Plan B'

``Clearly, the Fed needs to switch to plan B,'' Campbell R. Harvey, a professor of international business at Duke and the survey's founding director, said in a statement.

The Fed yesterday pledged to lend, in return for mortgage debt, $200 billion of Treasury securities to firms that trade directly with the central bank. The plan marked the most direct effort yet to repair the crisis in mortgage lending.

Businesses, on average, planned to increase investment in new equipment and software by 3.3 percent in the next 12 months, according to the Duke poll. In December, executives had planned to boost spending by 4.1 percent.

Companies planned to control labor costs, the report showed. Respondents foresaw ``no significant'' increase in payrolls, compared with December's projected 0.5 percent gain in employment.

Finance chiefs were even more pessimistic than economists. The economic slowdown in the U.S. will be deeper and the recovery weaker than previously forecast, according to the results of a Bloomberg News monthly survey released yesterday. The odds of a recession over the next 12 months were pegged at 50 percent, the same as in the February survey.

The outlook among company executives also darkened in other regions. Pessimism grew among chief financial officers in Asia and Europe, the Duke survey showed. The optimism index was highest in China, at 69 out of a maximum of 100. Still, two- thirds of Chinese executives polled said they were concerned a U.S. recession would reduce profits and exports.

To contact the reporter on this story: Carlos Torres in Washington at Ctorres2@bloomberg.net

Last Updated: March 12, 2008 11:31 EDT