CFOs Turn Pessimistic

Pessimism about the U.S. economy has returned to recession levels among chief financial officers, says the latest Duke University/CFO Magazine Global Business Outlook Survey.

The survey, which polled 937 CFOs from public and private companies worldwide, found that many company continue to hoard cash and that credit remains tight for small businesses. Unless conditions improve, the CFOs surveyed foresee earnings growth and capital spending falling within the next six to 12 months.

Here is a summary of the report’s findings, as issued by Duke and CFO in a news release.

• CFO optimism about the U.S. economy has fallen to 49 on a zero-to-100 scale, well below the rating of 58 from the last quarter and the lowest since the first quarter of 2009. Pessimists outnumber optimists four to one. European CFOs’ optimism rate is 58; Asian CFOs’ rate is 70.

• Half of CFOs say they will cling tightly to cash due to economic uncertainty and as a liquidity buffer. The other half will spend some cash reserves in the next year, primarily for investment, to pay down debt and to make acquisitions.

• Earnings are expected to rise 12 percent and capital spending almost 7 percent in the next 12 months. However, nearly half of CFOs say that unless the overall economy improves, there is only a six-month window during which they can maintain such a level of growth.

• U.S. CFOs expect to increase domestic full-time employment by 0.7 percent in the next year. Nearly one-fourth of all recent hires have been contract and temporary employees.

• Credit markets remain tight, especially for small companies. Most CFOs believe financial reform will add costs and restrictions that will dampen lending.

• CFOs’ economy-wide concerns include federal government policies, weak consumer demand, price pressure, and the weak national employment outlook. By a wide margin, the top concern among CFOs about their own businesses is the struggle to maintain profit margins, followed by rising health care costs and low employee morale.

• Exports are expected to increase by 50 percent over the next five years.