CFOs See Softer U.S. Conditions, Possible Recession

Sentiment among corporate chief financial officers about the US economy has slumped to a five-year low, with one-third predicting a recession within a year, a survey showed Sept. 13.The survey by Duke University for CFO Magazine said many corporate finance chiefs, worried about weak consumer spending along with rising labor and fuel costs, are planning cuts in capital spending and hiring, which could deepen the downward spiral.

The survey found that nearly half of CFOs are more pessimistic about the U.S. economy than in the prior quarter, and only 19.8% more optimistic, than last quarter. It found capital spending plans have been cut, with planned increases of only 5.1% over the next 12 months, down from a projected 7.5% rise last quarter. CFOs expect earnings to increase 9.4% over the next 12 months, down from last quarter's 10.4% predicted increase.

Executives are most worried about weak consumer demand, rising labor costs and high fuel costs, and will trim capital spending and hiring if these trends continue.

"CFOs are feeling so negatively about the US economy that one-third predict we will be in recession within one year," said John Graham, a finance professor at Duke's Fuqua School of Business and director of the survey.

Labor costs were the second-leading concern among CFOs, followed by a scarcity of skilled labor that is contributing to wage inflation. Labor shortages are particularly acute in the consulting, high-technology and construction industries.

The report comes from a survey of 959 chief financial officers (CFOs), including 571 from the U.S., 208 from Asia and 180 from Europe.

Copyright Agence France-Presse, 2006

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