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Optimism Hits Low Among CFOs; U.S. Recovery Not Expected Until 2014

August 24, 2012, 07:32 AM
Filed Under: Economic Commentary

According to the latest "CFO Outlook Survey" conducted by Financial Executives International (FEI) and Baruch College's Zicklin School of Business, Chief Financial Officers are experiencing alarming declines in optimism toward their businesses and especially the global economy.
Despite uncertainty and predictions on a prolonged recovery starting in 2014, U.S. CFOs reveal that their companies are pushing forward with plans to hire and increase wages, and demonstrate confidence in their risk management.

Respondents to the quarterly survey, which polls CFOs of public and private businesses, primarily in the U.S., Europe (Italy and France), Mexico and Japan on their economic and business confidence, revealed some of its lowest marks in optimism toward the global economy since the question was added in 2010.

U.S. CFOs confidence in the global economy also diminished this quarter, falling nearly eight points to 44.1 (from 51.9 in Q1); optimism in their own companies dropped to 67.80 (from 70.80 in Q1). The CFO Optimism Index for the U.S. economy saw similar trends as it declined nearly five points to 55.40 (from 60.60 in Q1).  Although U.S. CFOs are less optimistic and expect costs to increase in a number of areas including health care, technology, capital expenditures and compensation, they expect significant increases in revenues (11%) and net earnings (15%) in the next 12 months.
European CFOs' optimism in the global economy dropped significantly to 43.2 (from 54.00 in Q1), while their level of confidence in their own companies decreased to 54.50 (from 58.30 in Q1).In sharp contrast, European CFOs expect modest increases in costs and revenues with practically no increase in net earnings.

In a further sign of continued economic uncertainty, over two-thirds of U.S. CFOs now believe a recovery in the U.S. economy will not happen until sometime in 2013 (29%) or even 2014 or beyond (38%). In comparison with one year ago, when the majority felt that a recovery had already begun or would begin by the second half of 2012, this quarter only 23 percent of respondents now believe we are in the midst of recovery.

While their views on domestic recovery appear split, the majority of U.S. CFOs showed concern regarding the Patient Protection and Affordable Care Act, believing the decision to uphold nearly all of it would have a negative impact on their business (73%) and less than one fourth believing it would have no impact at all (24%). At this point in the election, U.S. CFOs by and large support Republican nominee for President Mitt Romney, with 71 percent suggesting he is the candidate most likely to succeed in resolving the current economic crisis, and 72 percent identifying Romney as the candidate that would be most beneficial to their company.

Read the press release from Financial Executives International.

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