FLORHAM PARK, N.J. and NEW YORK, March 23 /PRNewswire/ -- At its most
recent FOMC meeting on Wednesday, the Federal Reserve issued a mixed view
on the risks of inflation vs. recession. But CFOs are less ambiguous: They
rank economic slowdown as their biggest concern.
Twenty-four percent of the CFOs participating in the 2007 first quarter
"CFO Outlook Survey," conducted by Financial Executives International (FEI)
and Baruch College's Zicklin School of Business, are quite to very
concerned about recession, compared to only 10 percent who feel the same
about inflation.
When asked to rank economic worries, U.S. economic growth was at the
top, with inflation a distant tenth. Health care costs, consumer demand and
costs of regulatory compliance were also prevalent concerns.
The Federal Reserve's decision this week to leave interest rates
unchanged is not surprising to the CFOs. Half expect interest rates to
remain unchanged over the next year, while 35 percent expect to see lower
rates over the next 12 months.
"The CFOs' concerns about recession are real and consistent with their
expectations of stable or declining interest rates over the next year,"
said John Elliott, Dean of the Zicklin School of Business at Baruch
College. "However, they continue to be reasonably optimistic about their
own companies and are committing to new capital investments."
While the Federal Reserve hasn't raised interest rates since June 2006,
it increased rates at 17 consecutive prior meetings. Still, 14 percent of
the surveyed CFOs say credit availability has eased over the last six to
twelve months to a year, with only 5 percent saying it has tightened.
Companies are continuing to increase their capital investments. The
weighted average expected increase in capital spending over the next 12
months is 8 percent, compared to 7 percent last quarter. One out of five
companies (19 percent) is making "ambitious" investments in capital
expenditures, compared to only 7 percent that are holding off on all or
nearly all capital investments.
CFOs forecast a weighted average increase in technology spending of 9.5
percent, and expect new hiring to increase about 5 percent over the next
twelve months.
Although inflation is not a major concern of CFOs, they are feeling
higher real estate costs. For companies renting space, half indicate that
rents are rising -- modestly for 41 percent and significantly for 9
percent.
Regulatory and Corporate Finance Issues
Reacting to this month's conference in Washington on the global
competitiveness of U.S. capital markets, 83 percent of the CFOs say U.S.
financial reporting regulations hinder the ability of U.S. capital markets
to attract new listings vs. other major financial centers around the globe.
Regarding earnings guidance, almost two out of three public companies
in the survey favor the elimination of quarterly earnings guidance (64
percent) or providing guidance only annually with a range of earnings per
share numbers (63 percent).
"U.S. competitiveness is hindered when dollars are spent on disclosures
and accounting requirements that lack meaning to investors and divert
management's attention from the business," said Michael P. Cangemi,
President and CEO of FEI. "Easier to understand financial statements should
be our mutual goal."
The CFOs also feel strongly about options backdating improprieties.
Sixty-nine percent think companies that fraudulently backdated options
should be fined, compared to 8 percent who do not think a fine is
appropriate. An additional 11 percent support another penalty, the most
common being personal fines and/or corporate fines combined with a criminal
penalty, like imprisonment.
About the Survey
Full survey results are available at http://www.cfosurveys.com or from Andrew
Healy at ahealy@middlebergcommunications.com.
This quarter, the CFO Outlook Survey, conducted by Financial Executives
International and Baruch College's Zicklin School of Business, interviewed
244 corporate CFOs electronically the week of March 12. CFOs from both
public and private companies and from a broad range of industries, revenues
and geographic areas, including some off-shore companies, are represented.
Survey respondents are members of Financial Executives International.
Revenue-weighted averages are provided for projected changes in capital
and technology spending. An employee-weighted average is provided for the
projected changes in hiring.
FEI has been conducting surveys gauging the country's economic outlook
from the perspective of CFOs for the past nine years.
About FEI
Financial Executives International (FEI) is the leading advocate for
the views of corporate financial management. Its 15,000 members hold
policy- making positions as chief financial officers, treasurers, and
controllers. FEI enhances member professional development through peer
networking, career planning services, conferences, publications, and
special reports and research. Members participate in the activities of 86
chapters, 75 of which are in the United States and 11 in Canada. For more
information about FEI, visit http://www.fei.org.
About Baruch
Baruch College, founded in 1847, is a senior college of the City
University of New York. The Zicklin School of Business at Baruch College is
the largest and most diverse AACSB accredited collegiate school of business
in the nation. Baruch has a long tradition of producing accounting and
finance graduates who become leaders as CPAs and CFOs. http://www.baruch.cuny.edu
SOURCE Financial Executives International; Baruch College
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Related links:
http://www.fei.org
http://www.baruch.cuny.edu
http://www.prnewswire.com/comp/310650.html /
CONTACT:
Andrew Healy, Middleberg Communications,
+1-212-354-5020; or Chris Allen, FEI, +1-973-765-1058; or John
Elliott, Baruch College, +1-646-251-3032
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