The U.S. economy is now mired in a recession or soon will be, according to 75 percent of chief financial officers participating in the quarterly Duke University-CFO Magazine Global Business Outlook survey.
Those beliefs reflect a lack of optimism not seen before in the survey, which dates back six years. Seventy-two percent of the CFOs are more pessimistic about the economy than they were the last quarter, and only 8 percent are more optimistic.
“Our survey started showing evidence of an economic slowdown a year ago,” said John Graham, the survey’s director and a finance professor at Duke’s Fuqua School of Business. “Today, not only do the CFOs say we are already in recession, they predict a prolonged economic downturn. The news from CFOs is pretty grim.”
In another all-time low for the survey, pessimists about their own firms outnumber optimists 38 to 30 percent.
“This could be the longest slowdown since the double dip recession of 1979-81,” added Duke Professor Campbell Harvey.
An economic rebound is not expected until 2009, according to nearly 90 percent of the CFOs. More than 1,000 CFOs took part in the survey. They represent both public and private companies.
Some key findings:
• 54 percent say the U.S. is in recession
• 24 percent say a recession is highly likely this year
• CFOs don’t expect a recovery until late 2009
• Top concerns include weak consumer demand and the continuing upheaval in the credit and housing markets
• High cost of labor is the top internal concern
• Tighter credit and higher interest rates have “hurt” 35 percent of companies the CFOs in the survey represent
• Some 60 percent of companies represent in the survey have put off expansion plans due to the credit market
• Overall capital spending is likely to increase only 3.3 percent or what Harvey described as “maintenance level”
• Inflation will “rear its ugly head,” as Harvey described it, hitting 3 percent over the next year
• The Fed’s recent cutting of interest rates has also done little to help companies, according to 74 percent of the CFOs