CFOs Less Optimistic than the Rest of Us

MBA (8/12/2008 ) Sorohan, Mike
What do chief financial officers of American companies know that we don’t? Nothing perhaps, but a new survey shows that despite declining oil prices and a perceived bottoming out of the housing market, many CFOs remain pessimistic.
The CFO Optimism Index conducted quarterly by Financial Executives International and the Zicklin School of Business at Baruch College found that CFOs’ perception of economic conditions reached a record low 48.92 in the second quarter, even lower than the previous record of 54.29 in the first quarter. CFOs cited weak economic growth, unstable oil prices, consumers spending and demand and inflation as top concerns.

On a positive note, however, CFOs had a more hopeful outlook for their own companies, citing their ability to control expenses, remain competitive and control labor costs.

"We continue to see that CFOs are increasingly anxious about the business ramifications of the current U.S. economic downturn," said John Elliott, dean of the Zicklin School. "However, while economic worries remain, the steadiness in CFOs' outlook toward their own companies may reveal that they are adapting to the turmoil and taking appropriate actions within their organizations."

Over the next 12 months, the majority of CFOs said they continue to plan increases in technology spending by an average of 4 percent and other capital spending by an average of eight percent. The survey said CFOs expect modest hiring increases of 1 percent but believe that they will be able to increase product prices by five percent.

Interestingly, despite news reports suggesting that the oil “bubble” has burst, nearly half of CFO expect the price of crude oil will continue to skyrocket, saying that the price of oil per barrel will be at least $160 or higher in six months.

In response to higher oil prices, CFOs said they have increased prices of products and services (53 percent); cutting back on corporate travel (50 percent) and engaging in “green” initiatives (47 percent).

“CFOs don't anticipate cost relief," said Cheryl de Mesa Graziano, vice president or research and operations at the Financial Executives Research Foundation, the research affiliate of FEI.