- Nearly Half Cutting Back On Hiring and One Third Delaying Spending -
- CFOs Also Favor Process Change For Ratings Agencies -
FLORHAM PARK, N.J. and NEW YORK, March 26 /PRNewswire/ -- CFOs of
American companies believe recession concerns in the U.S. are impacting
their Company's budgets, spending and hiring, according to a recent survey
of CFOs conducted by Financial Executives International (FEI) and Baruch
College's Zicklin School of Business.
The economic downturn and weakness of the U.S. dollar continue to
impact businesses in the U.S. While more than one third of CFOs (34%)
reported that the weakness of the U.S. dollar has led to increased
international sales, over half (51%) have seen an increase in the costs of
commodities/raw materials, and one third (33%) say their quarterly earnings
have decreased.
When asked what their view was of a potential recession in the U.S. in
the current year, 41 percent of the CFOs surveyed said they believe the
U.S. is currently in a recession, while an additional 32 percent believe
the U.S. will likely go into a recession within the next 6 months. Only 18
percent said they did not believe the U.S. would go into a recession at all
in 2008.
"What we are hearing from CFOs is, recession or not, they are taking
defensive measures to combat the economic slowdown." said John Elliott,
Dean of the Zicklin School of Business at Baruch College. "This quarter's
survey revealed that almost half of the CFOs are in agreement with U.S.
economists and believe we are currently in a recession."
Economic Optimism Continues to Sink
The CFO Optimism Index for the U.S. economy was 54.29 for this quarter,
dropping even further past last quarter's three-year low of 56.26. Thirty-
four percent of the CFOs surveyed said that, during the first quarter of
this year, they had delayed the implementation of business-related spending
due to recession concerns.
CFOs' outlook toward their own companies decreased again this quarter,
as the Optimism Index of the CFOs' own companies sank to 68.12, falling 2.1
points lower than last quarter, which itself was a three-year low.
"This quarter's data points to a continued decline in optimism among
CFOs," said Michael P. Cangemi, FEI President and CEO. "With the permeation
of pessimism, the survey revealed two-thirds of companies identifying some
type of cutbacks, specifically in the areas of layoffs and reduced hiring.
It is now more important than ever for CFOs to identify efficiencies and
conduct smart business."
Budget Changes
In response to the current economic downturn, 46 percent of the CFOs
surveyed identified hiring as an area for cutbacks. Nearly a quarter (24%)
selected conducting layoffs when asked the same question. Interestingly, a
similar number (23%) of CFOs surveyed said they had actually increased
their marketing / advertising budget as a response to the economic
downturn.
Additional Data:
Ratings Agencies' Process
CFOs surveyed support changing the ratings agency process. Thirty-five
percent of CFOs said ratings agencies should create a new rating scale.
Nineteen percent of those surveyed recommended the addition of warning
labels to the agencies' ratings, with close to half of respondents (46%)
stating that they would have more confidence in the ratings if the agencies
changed their process to include these warnings and provide better
distinctions for structured finance ratings.
Economic Stimulus
When asked about the economic stimulus bill, only 12 percent of CFOs
said they would increase equipment purchases to take advantage of the
recently- passed bill which allows business accelerated depreciation tax
breaks on equipment purchased and placed into service in 2008.
About the Survey
Full survey results are available at http://www.cfosurveys.com or from Jamie
Renninger at jamie.renninger@fd.com.
This quarter, the CFO Outlook Survey, conducted by Financial Executives
International and Baruch College's Zicklin School of Business, interviewed
209 corporate CFOs electronically the week of March 3. 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.
Financial Executives International has been conducting surveys gauging
the country's economic outlook from the perspective of CFOs for the past
ten 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.financialexecutives.org.
About Baruch
Baruch College 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
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