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April 9, 2008
CFOs React to Pessimistic Recession Concerns
CFOs have a deep knowledge of their company's economic condition. Convinced a recession is here or near, finance chiefs recently reported they're delaying capital spending projects and mulling over the future of their manpower.
Chief financial officers (CFOs) say recession concerns in the United States are already delaying capital spending projects and have companies hunkering down on their hiring, according to the latest survey of 209 corporate CFOs conducted by Financial Executives International and Baruch College's Zicklin School of Business.
In this quarter's CFO Outlook Survey, CFOs surveyed represent both public and private companies from a broad range of industries, revenues and geographic areas.
While more than one-third of CFOs (34 percent) reported that the U.S. dollar's weakness has led to increased international sales, more than half have seen an increase in the costs of commodities/raw materials, and one-third (33 percent) say their quarterly earnings have decreased.
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 six months. Only 18 percent said they did not believe the U.S. would go into a recession at all in 2008.
The CFO Optimism Index for the U.S. economy for this quarter dropped to 54.29 past last quarter's three-year low of 56.26. Thirty-four percent of the varied CFOs surveyed said that "during the first quarter of this year, they had delayed the implementation of business-related spending due to recession concerns."
"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," said Michael P. Cangemi, FEI President and CEO.
Specifically, nearly half the CFOs are cutting back on hiring and one-third are delaying spending in reaction to this somber economic downturn.
In addition to seeing an anemic national economy, the CFOs replied with less hope than earlier about their company's economic situation.
According to a statement:
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.
"What we are hearing from CFOs is, recession or not, they are taking defensive measures to combat the economic slowdown," John Elliott, Dean of the Zicklin School of Business at Baruch College, said in an announcement of the latest findings.
Accordingly, 46 percent of the CFOs surveyed identified hiring as an area for cutbacks. Nearly a quarter (24 percent) selected conducting layoffs when asked the same question. Interestingly, a similar number (23 percent) of CFOs surveyed said they had actually increased their marketing and advertising budget as a response to the economic downturn.
When the researchers 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."
CFOs seem to recognize fully the stagnation in America and are adjusting consumption of new automation products and labor.
"It is now more important than ever for CFOs to identify efficiencies and conduct smart business," Cangemi said.
Let us know how, if at all, your company has adjusted its efficiencies, capital spending and hiring for the 2008 economy.
Resources
CFO Outlook Survey Detailed Summary Report - 1st Quarter 2008
Baruch College's Zicklin School of Business and Financial Executives International, March 26, 2008
Survey Reveals CFOs Reaction To Recession Concerns
Baruch College's Zicklin School of Business, March 26, 2008
Survey Reveals CFOs Reaction to Recession Concerns
Financial Executives International, March 26, 2008
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2 CommentsFrom what I can see in the company (oil blending/distributing) I am working for, is that spending has increased, primarily in the area of remodeling and reorganizing offices and such ... nothing spent on energy effecient equipment, or a new boiler, or pumps or clarifiers.
Yet, in the past 2 years I've worked here, they haven't been able to accurately calculate the amount of money coming in and going out. Closing month end with variance and paying bills from 2006 ... now, seems quite out of place and leads me to suspect the recession about to hit is due to years of inaccurate data. I think Allen Greenspan explained something along these lines as the national deficit is way out of proportion. We've disrupted the Global Economy. Has Experion, Trans Union, or Equifax, given a credit score for the USA ... let me guess it's at 800 and they can keep on borrowing!
In conclusion, the US recession will be driven by our dollar becoming worthless as scandalous businesses and politicians are brought to justice or flee to other countries and convert there stashed USD's into pounds or euros.
On the other hand it is possible to take the approach that the pool of money available, inflated by voodoo economics, is much larger than the amount needed to keep most families out of poverty. All that needs to occur is a little spreading it around (increases in the number of small businesses), which all adds up to a threatened recession setting for the next 3 to 5 years.
National Association of Securities Dealers in 1992 exposed how Brokers/Dealers took massive bribes and hid the true nature of weak and stagnent businesses.
Since that year, angry customers have taken them to task in court and won, as FINRA continues to publish their wicked deeds today. Therefore, heads of corporations can still see a sinking dollar? With Bear Stearns and Washington Mutual
set deep in the pockets of taxpayers, why should the rest resist the urge to divest themselves at the expense the believed weakened buck?
