CFO Outlook on U.S. Economy Nosedives

Friday, August 8, 2008 12:33 PM

CHICAGO -- Optimism among chief financial officers over the outlook for the U.S. economy has dropped to a new low, thanks to rising oil costs, weak consumer spending and inflation, according to a quarterly survey released Friday.

The CFO Optimism Index compiled by Financial Executives International and Baruch College of the City University of New York showed the latest quarterly reading on the economic outlook was 48.92, "plummeting even further" from the 54.29 recorded in the previous quarter, which was an all-time low for the survey.

The survey was conducted in the week of July 7, with 219 CFOs from public and private companies interviewed electronically.

Forty-eight percent of CFOs identified U.S. economic growth as their biggest worry in the second half of 2008. Thirty-five percent said the high cost of oil was one of their top concerns, followed by consumer spending (29 percent) and inflation (25 percent).

The CFO Optimism Index for their own companies' outlook all slipped to a new low of 67.06 from 68.12.

At least half of the respondents predicted oil would hit $160 a barrel in six months. Financial Executives International and Baruch pointed out in a release that when this prediction was made, NYMEX crude oil futures prices ranged between $136.04 and $145.18 a barrel.

The survey asked CFOs what they have been doing to mitigate high oil costs. About 53 percent said they were increasing prices for their products and services, 50 percent were cutting back on corporate travel and 47 percent said they were becoming more ecologically responsible by, for instance, investing in more energy-efficient products.

When asked which presidential candidate — Democrat Barack Obama or Republican John McCain — would benefit their companies most overall, an overwhelming majority of 71 percent favored McCain, while just 13 percent chose Obama.

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