http://www.cfo.com/article.cfm/11575214?f=3Dcfoinside
John R. Graham, director of the survey and a finance professor at
Duke's Fuqua School of Business. "Even more worrisome, there is
evidence of stagflation =97 slow economic growth and rising unemployment
combined with inflation."
Of the 1,051 CFOs surveyed this quarter, 71 percent say they did not
expect the economy to rebound until 2009, and 54 percent did not
expect a rebound to happen until the midpoint of the year. As a
result, U.S. companies expect to reduce their domestic workforces by
an average of 0.2 percent this year. Capital spending is expected to
increase by just 2.3 percent, and earnings growth will rise by an
"anemic" 2.9 percent, according to the survey's producers.
the mushrooming credit crisis this year has receded in the minds of
some CFOs, many firms =97 particularly those with lower ratings =97 are
still feeling credit-related pain. Credit remains hard to find, say 58
percent of CFOs. Half of those polled say borrowing costs have
increased and nearly 60 percent say they will have to reduce
investment or hiring as a result.
"The bad news is that the credit crisis is devastating lower-rated
firms," according to Duke Professor Campbell R. Harvey, the founding
director of the CFO survey. "Eighty-two percent of these companies
have been hurt directly by the credit crunch."
On the bright side, CFOs show somewhat less pessimism than they
displayed in the previous quarter, despite the generally gloomy
environment. After several quarters of declining optimism, 53 percent
of CFOs say they are more pessimistic about the U.S. economy this
quarter, and 21 percent say they are more optimistic. In the last
survey, released in March, optimism reached a six-year low. At that
time, 72 percent of finance chiefs were more pessimistic about the
U.S. economy than they were the quarter before, while 8 percent felt
more optimistic.
"This quarter, we're seeing bad news with a little bit of good news,"
Harvey says. "In the fourth quarter of 2007 and the first quarter of
2008, pessimists outnumbered optimists by an 8 to 1 margin. This
quarter, the ratio has improved to roughly 3 to 1, potentially
indicating stabilization."
In Europe, 64 percent of finance chiefs are more pessimistic about
their domestic economies compared to the previous quarter, while just
8 percent are more optimistic. Meanwhile, employment in Europe is
expected to fall by 1.2 percent, capital spending is expected to
increase by 2.8 percent and earnings will rise by 3.1 percent,
according to the survey. Weak consumer demand and the cost of fuel are
the top two concerns among European CFOs, as well.
Asia, CFO optimism has reached a new low, with 62 percent feeling more
glum about regional economic growth and 21 percent feeling better
about it compared to the previous quarter. However, optimism in Asia
still trumps that in Europe or the U.S. Employment in Asia is expected
to rise by 3.3 percent in the next year and CFOs expect to increase
capital spending by 6.7 percent and increase wages by 6.2 percent.
Asian CFOs are also re****ting growing signs of the region's economy
"de-linking" from that of the U.S. Among finance chiefs polled in
Asia, 35 percent say the current slowdown in the U.S. has not hurt
their firms and 27 percent say that any negative impact is less than
it would have been five years ago. Of those who have been negatively
affected, 71 percent say the slowdown has led to reduced customer
orders, and 40 percent say customers are demanding price discounts.
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