CFOs are experiencing alarming declines in optimism toward their businesses and the global economy, according to a new survey.

The survey, conducted by Financial Executives International and Baruch College's Zicklin School of Business, found that despite uncertainty and predictions of a long-drawn-out recovery, U.S. CFOs said their companies are pushing ahead with plans to hire and increase wages, and demonstrate confidence in their own risk management.

Respondents to the quarterly survey, which polls CFOs of public and private businesses—primarily in the U.S., Italy, France, Mexico and Japan—on their economic and business confidence, revealed some of its lowest levels of optimism about the global economy since 2010. European CFOs’ optimism in the global economy dropped significantly to 43.2 (from 54.00 in Q1), while their level of confidence in their own companies decreased to 54.50 (from 58.30 in Q1).

U.S. CFOs’ confidence in the global economy also diminished this quarter, falling nearly eight points to 44.1 (from 51.9 in Q1), while optimism in their own companies dropped to 67.80 (from 70.80 in Q1).

The CFO Optimism Index for the U.S. economy saw similar trends as it declined nearly five points to 55.40 (from 60.60 in Q1). While U.S. CFOs are less optimistic and expect costs to increase in a number of areas including health care, technology, capital expenditures and compensation, they expect significant increases in revenues (11 percent) and net earnings (15 percent) in the next 12 months.  In sharp contrast, European CFOs expect modest increases in costs and revenues with practically no increase in net earnings.

A significant proportion of U.S. CFOs (58 percent) plan to hire additional employees at their companies in the next six months and anticipate wage levels either remaining the same (55 percent) or increasing (45 percent).

This is in direct contrast to Europe where CFOs do not anticipate hiring additional employees (64 percent report they will not) and project wage levels to remain relatively stable (75 percent). Overall, European CFOs expect their countries’ average unemployment rate to climb to 10.3 percent over the next year, in contrast to U.S. CFO expectations that the U.S. unemployment rate will average 7.8 percent during the same period.

LIBOR Scandal Fallout
CFOs this quarter also weighed in on the ongoing investigations into large multinational banks’ alleged manipulation of the London Inter-Bank Offered Rate. Despite the LIBOR scandal, the majority of CFOs still feel the same about the integrity of their principal banking partner (75 percent of U.S. CFOs, 52 percent of European CFOs).

The majority of CFOs also feel that regulators’ ability to protect the financial system and bank customers have remained the same. More than a third of U.S. CFOs have less confidence in regulators (39 percent), while only a handful are more confident (3 percent).

The percentage of European CFOs responding to the survey who were more confident (19 percent) in regulators was much higher than that of their U.S. counterparts.

However, in terms of managing risk, U.S. CFOs showed more confidence in risk controls and the risk management process (86 percent), a likely direct result of Sarbanes-Oxley, which is celebrating its 10th anniversary. Fewer CFOs in Europe showed confidence in risk controls (65 percent).

"Having faced a turbulent economic environment in the first half of 2012, CFO confidence has understandably begun to erode," said Financial Executives International president and CEO Marie Hollein in a statement. “With an upcoming presidential election in the U.S., economic turmoil in Europe, and ongoing widespread investigations into financial institutions, there are credible reasons for the dip we have seen in CFO confidence. Still, many CFOs expect for company revenues to increase, a good sign for hiring, especially in the U.S. as well as increased capital spending and investments made in both staff and equipment.”

As the European financial crisis continues, CFOs expressed different feelings about the future of the European Union. While CFOs agree on a global basis regarding the status of the European Union in six months (“status quo" was the top choice for more than a third of CFOs in both regions), 42 percent of European CFOs forecast consolidation one year from now, with 29 percent expecting a recovery. This is in contrast to U.S. CFOs who suggest the EU may face “dissolution” (24 percent) or recovery (20 percent) one year from now. 

CFOs also revealed that cash flows were the most important factor in measuring their financial performance. This was the case for more than half of EU CFOs who favored cash flows (58 percent), while 46 percent of CFOs in the U.S. also chose cash flows.

U.S. CFOs also consider earnings an important measure of financial performance (41 percent), while European CFOs value cash flow at a 3-to-1 rate over earnings.

Another point of difference between EU CFOs and U.S. CFOs was in the importance of cash reserves and sales. European CFOs attach more importance to cash reserves, while U.S. CFOs place a higher value on sales.

CFOs Lean Toward Romney
In a further sign of continued economic uncertainty, over two-thirds of U.S. CFOs now believe a recovery in the U.S. economy will not happen until sometime in 2013 (29 percent) or even 2014 or beyond (38 percent).

In contrast with a year ago, when the majority felt that a recovery had already begun or would begin by the second half of 2012, this quarter only 23 percent of the survey respondents said they now believe we are in the midst of recovery.

While their views on domestic recovery appear to be split, the majority of U.S. CFOs showed concern regarding the Patient Protection and Affordable Care Act, believing the decision to uphold nearly all of it would have a negative impact on their business (73 percent) and less than one-fourth believing it would have no impact at all (24 percent).

At this point in the election, U.S. CFOs by and large support the presumptive Republican presidential nominee Mitt Romney, with 71 percent suggesting he is the candidate most likely to succeed in resolving the current economic crisis, and 72 percent identifying Romney as the candidate who would be most beneficial to their company.

“The tone provided by CFOs signals heightened concern over the economic climate,” said FEI senior director of research Bill Sinnett. “This quarter, their frustration over the economy has not only resulted in a declined sense of optimism, but also predictions for a delay in the start of recovery and plans for increased costs as health care reform is upheld by the Supreme Court.”

Oil Prices: CFOs believe that crude oil prices, which were $83.50 at the start of polling, will rise slightly in the next six months, with 51 percent of U.S. CFOs and 45 percent of EU CFOs suggesting it will average $90. As in past quarters, most CFOs once again stated that their company is not actively engaged in changing behavior to accommodate rising oil prices.

Nearly half of the CFOs in Europe feel that the current U.S. presidential elections will not have an impact for their nation’s economy (46 percent) and nearly three-quarters do not believe there will be implications for their business (70 percent). 

The large majority of CFOs across the board have little plans to change their companies' strategy toward offshoring or reshoring activities. Additional results from the survey include CFOs’ forecast for interest rates and inflation rates and select findings from CFOs in Mexico. Full survey results and historical data comparisons are available at or

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