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CFOs Pessimistic On Economy

The latest Duke University/CFO Business Outlook survey shows that the level of optimism about the U.S. economy has dropped among chief financial officers, with pessimists now outnumbering optimists. The June 2007 survey asked 484 American CFOs from public and private companies about their expectations for the U.S. economy. Those surveyed expect slow growth in earnings, capital spending and hiring. In addition, they are very concerned about rising labor costs and weakening consumer demand.

The CFO optimism index for the U.S. economy fell into negative territory for the first time this year. Only 26% of chief financial officers are more optimistic about the economy than in the previous quarter, which is down from 35% in the last survey conducted in March. This is in contrast to the 30% who are more pessimistic. John R. Graham, director of the survey and a finance professor at Duke’s Fuqua School of Business, states on Duke University’s Office of News & and Communications website that, “The optimism index has sunk below the water again, to a level that is low by historical standards.” He adds, “With pessimists outnumbering optimists, the prospects for the U.S. economy are poor. The CFO optimism index has a good track record of predicting future capital spending, employment and earnings. The main reasons that CFOs cite for their reduced economic optimism are increased fuel inflation and slowing consumer demand, driven in part by a weak housing market.”