UPDATE 3-Akzo says feels economic chill, shares drop

(Adds AGM approval of buyback, updates shares)

By Harro ten Wolde

AMSTERDAM, April 22 (Reuters) - Dutch chemical group Akzo Nobel NV (AKZO.AS: Quote, Profile, Research) said on Tuesday the U.S. and European economic slowdown was starting to bite, hitting shares even as it raised its target for cost savings from the takeover of Britain's ICI.

"The economic slowdown continues to be more evident in our retail businesses in the U.S. and Europe and, as indicated in 2007, within performance coatings in our industrial coatings business," Akzo told shareholders at its annual meeting.

Akzo shares were down 5.4 percent at 53.98 euros by 1421 GMT after earlier dropping to a low 53.36 euros, underperforming a 0.9 percent lower DJ Stoxx European chemical index .

Rival U.S. paint makers like PPG Industries (PPG.N: Quote, Profile, Research) and Sherwin-Williams (SHW.N: Quote, Profile, Research) have been hit by the sagging U.S. housing market and weakening global economy.

"The comments were not very hopeful," Petercam analyst Jan van de Bossche said. "We have heard some worries from PPG Industries and Sherwin-Williams and now Akzo has joined them."

Akzo, the world's biggest paints maker known for its Dulux and Sikkens brands, said it was still confident it would outgrow its markets and further improve the bottom line.

It said its marine and protective coatings continued to perform strongly, while specialty chemicals was also doing well despite higher energy costs.