Thursday, June 28, 2007

CFOs Continue to be Pessimistic about the Economy

According to a recently completed survey of CFOs, they continue to be pessimistic about the economy ( Limited ability to increase prices, limited capital spending, declining hiring expectations and a declining inventory growth all added up to continued pessimism about the economy. Similar results were found in a different survey published by earlier this month.

Once again as with other news reported this week, I am having a hard time finding the silver lining in all these reports.

The optimism of U.S. corporate chief financial officers dimmed a bit in the second quarter, and they cut predictions for growth in business spending and selling prices, a survey released Wednesday found.

An electronic survey of 157 corporate CFOs by Financial Executives International and Baruch College's Zicklin School of Business found they expect prices for their products to rise just 1.9 percent during the next year, down from the 2.1 percent gain they had expected in the first quarter.

"The CFOs forecast of price increases of less than 2 percent during the coming 12 months represents a relatively benign inflation environment," John Elliott, dean of the Zicklin School, said in a statement.

The survey, conducted the week of June 11, also found that the CFOs expect capital spending to increase just 2.3 percent, down from 7.9 percent in the first quarter, and hiring to rise 4.1 percent, off from 5.2 percent.

Sixty-seven percent said they are reducing their rate of inventory growth, with 41 percent saying they are actually reducing the level of their stockpiles.

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