CFO optimism about the U.S. economy and their own companies' financial prospects is the lowest it has been during the past 12 months, according to a survey of Financial Executives International members.

According to a second quarter survey of 186 CFOs conducted by FEI and Baruch College's Zicklin School of Business, the CFO Optimism Index of the U.S. economy is now 68.66, down 7 percent from a year ago. The Optimism Index of CFOs' own companies' prospects registers 74.09, a smaller drop of 3 percent from last year.

CFOs are predicting only a 5 percent increase in capital spending over the next 12 months, less than half their prediction of 13 percent three months ago. Technology spending is expected to increase 4 percent, the lowest forecast since June 2003, according to survey results.

"The level of optimism of the U.S. economy is down, as would probably be expected as the recovery matures. Recent rises in short-term interest rates, oil prices and the U.S. dollar have likely taken some of the shine off the outlook," noted Burton Rothberg, assistant professor of accounting at Baruch. "Nonetheless, the CFOs continue to rate the prospects for their own companies at high levels."

Reacting to the Pension Benefit Guaranty Corp.'s assumption of large portions of United Airlines' $9.8 billion in pension obligations, 65 percent of CFOs are quite or very concerned about the PBGC's future solvency. Despite their concerns, most CFOs think that the PBGC, which is not funded by general tax revenues, should stay that way. However, 17 percent would approve of using taxpayer dollars to support the financial well-being of the PBGC. If PBGC premiums rose high enough, about a third of the CFOs whose companies offer defined-benefit plans said that they would consider a reduction in benefits or would consider no longer offering such a plan.

Meanwhile, CFOs expect health care costs to rise about 8 percent over the next 12 months, a lower expectation when compared to prior quarters, the survey noted.

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