Spending Forecasts Largely Unchanged
Pension Protection Act Impacts 401(k) Plans
FLORHAM PARK, N.J. and NEW YORK, Oct. 3 /PRNewswire/ -- Despite
reported recession fears, CFOs' economic optimism dropped only slightly in
the third quarter to 67.6, compared to 68.6 in the second quarter,
according to the "CFO Outlook Survey," conducted quarterly by Financial
Executives International (FEI) and Baruch College's Zicklin School of
Business. Company-specific optimism declined even less, to 75.5 from 76.3
last quarter.
Seventy-three percent of the CFOs surveyed expect capital spending to
increase at their companies in the coming year, at a weighted average rate
of nearly 8%, very close to last quarter's forecast. Technology spending
forecasts were virtually unchanged at nearly 7%. Anticipated health care
spending declined from 8.4% to 7.7%, and hiring fell from 4% last quarter
to 3% for the third quarter.
"CFOs are less gloomy than the media suggest," said John Elliott, Dean
of Baruch College's Zicklin School of Business. "They foresee a healthy 11%
growth in profits on average, and their responses suggest they are staying
on course rather than being distracted by economic uncertainty. That kind
of determination could be a strong counterbalance to the forces threatening
a more serious downturn."
Competition was the biggest worry for the companies surveyed, cited by
29% of respondents as their first or second worry. Consistent with their
competition concerns, 36% of those surveyed expect their companies to spend
more on product investment in the next year, while 43% anticipate
reinvesting more in the company.
Inflation Concerns, Prices Ease
Inflation took a back seat to recession as a concern for CFOs this
quarter. Sixty-one percent of respondents said they were moderately to very
concerned about recession, while 59% were moderately to very concerned
about inflation, compared to 77% last quarter. Seventy-one percent expect
their companies to raise prices on their products, down from 76% last
quarter. The average increase forecast fell to 2.5% from over 3.0% in June.
Good Help Still Hard to Find
More than half the survey respondents said their companies are looking
for talent in the finance department, with over 90% saying they are having
moderate to extreme difficulty filling mid-level and senior positions. "The
need for experienced finance professionals continues to increase," said
Colleen Cunningham, President and CEO of FEI. "Companies know that the
quality of their financials today has a significant effect on their
competitive position."
Pension Protection Act Affects 401(k) Plans
Eighty-nine percent of responding firms offer 401(k) plans. As a result
of the Pension Protection Act, 28% of these firms have made or plan to make
changes based on the law's provisions, while another 33% have not made a
decision yet and 39% anticipate no change in the near term.
Firms that are open to change are most likely to add automatic
enrollment (38%) while offering investment advice and adding Roth options
are each under consideration for about 22% of these firms. The most common
default investment options for auto enrollment will most likely be money
market funds (33%), but rebalancing asset allocation funds are a close
second at 29%. The Guaranteed Investment Contract (GIC) will be the most
likely default option at only 4% of the companies.
About the Survey
Full survey results will be available October 5 at http://www.cfosurveys.com.
For the full results prior to that, please contact
andrewhealy@towerspr.com.
This quarter, the CFO Outlook Survey, conducted by Financial Executives
International and Baruch College's Zicklin School of Business, interviewed
171 corporate CFOs electronically the week of September 18. 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
spending and for projected price increases. An employee-weighted average is
provided for the projected changes in health care costs and 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 collegiate school of business in the nation, producing
graduates who assume leadership positions in all areas of American business
as well as conduct important academic research. Baruch has one of the
largest accounting programs in the country whose graduates become
practicing CPAs. http://www.baruch.cuny.edu
SOURCE Financial Executives International
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Related links:
http://www.fei.org
http://www.baruch.cuny.edu http://www.cfosurveys.com/
http://www.prnewswire.com/comp/310650.html /
CONTACT:
Andrew Healy of TowersGroup, +1-212-354-5020,
andrewhealy@towerspr.com; Chris Allen of FEI, +1-973-765-1058,
callen@fei.org; or John Elliott of Baruch College,
+1-646-251-3032, John_Elliott@Baruch.CUNY.edu
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