Capital Markets

CFOs: Yes, We Worry

Nearly all finance executives' confidence in the economy has plummeted, reports FEI.
Stephen TaubJanuary 30, 2008

Chief financial officers have become more pessimistic about the economy, according to a new survey.

Financial Executives International and Baruch College’s Zicklin School of Business found that CFO optimism has fallen 19 percent over the past year. What’s more, nearly 100 percent of the CFOs are as concerned about recession or more concerned about one occurring than they were last quarter.

These findings are consistent with the results in the latest Duke University/CFO magazine Global Business Outlook Survey, which found a record-breaking 72 percent of CFOs are less optimistic about the economy than they were last quarter, while just 9 percent are more optimistic. Pessimistic survey respondents outnumbered optimistic ones by an 8-to-1 margin. In addition, 40 percent of CFOs predicted a recession in 2008.

Similar to their recession fears, CFOs are nearly unanimous in their negative outlook when it comes to inflation. In the most recent FEI-Baruch quarterly survey, more than 95 percent of 361 corporate CFOs reported being as concerned, or more, about inflation than they were last quarter.

They’re are also less upbeat about their own companies. The Optimism Index of CFOs’ companies sank from the prior quarter, which had already hit a three-year low.

It’s little surprise, then, that the majority of the survey respondents cited the economy as the most important issue when evaluating the U.S. presidential candidates. The second and third most frequently cited priorities for choosing the next president are the war in Iraq and taxes, which were each cited by 34 percent of the CFOs.

“It is clear that the state of the economy is the number-one thing on everyone’s mind, and CFOs of course are no exception, from how they will choose the next leader of our nation, to what keeps them up at night,” said John Elliott, dean of the Zicklin School. “Volatility in the financial markets and crisis in the credit industry, paired with weakness of the dollar, have led to real and immediate concerns by CFOs about recession and inflation.”

Drilling further down, CFOs said the top economic worries for 2008 are economic growth and consumer spending.

“It appears we have moved from a position of possibility to one of certainty as continued signs of weakness permeate the U.S. economy,” said Michael Cangemi, FEI’s president and CEO. “We are dealing with one of the toughest economies in the last decade, and CFOs have certainly had their finger on the pulse as we have watched their optimism towards the U.S. economy continue to drop nearly 20 percent over the past four quarters.”