The News & Observer Friday, December 10, 2004 
Subscribe
Search Keyword
Raleigh Durham Cary Chapel Hill

Member Center
  Home
  Local & State
  Nation & World
  Politics
  Business
   North Carolina
   Personal Finance
   Technology
   Stocks Center
  Sports
  Lifestyles
  Opinion
  Obituaries
  Multimedia Gallery
  Weather
  Archives
  Print Edition
  Marketplace
  Classified Find|Post  
  Jobs Find|Post  
  Autos Find|Post  
  Homes Find|Post  
  Rentals Find|Post  

  Search Local
  Websites
 
  Movies
  Dining & Clubs
  Weddings
  Travel
  Directory
  Education Guide

Business Home / Business  

Topics: Technology | Personal Finance    Columnists: Gilster | Hagel | Nicholson | Smith
Stocks: Summary | Local Indices | World Markets | Regional | Splits | Currency | Wealthmeter | My Portfolio
 


Published: Dec 10, 2004
Modified: Dec 10, 2004 7:21 AM
Survey finds CFOs less optimistic


One-third of CFOs in a recent survey said fear about domestic terrorism is affecting their bottom lines. In a photo from August, a police officer guards the New York Stock Exchange.
Getty Images File Photo

The nation's chief financial officers grew less optimistic in the past three months, citing concerns about the rising costs of health care, a skyrocketing federal budget deficit, and the threat of another terrorist attack on the United States.

That's according to a survey released Thursday by Duke University and CFO magazine.

The survey, based on responses from 308 CFOs last week, said those concerns will drag down hiring and other corporate spending in 2005. Although those concerns have weighed on the minds of CFOs for the past year, the survey suggests they may now be taking a heavier toll.

One-third of the respondents said fears about domestic terrorism are seriously affecting their bottom lines. More than two-thirds said President Bush's top priority in his second term should be reducing the federal budget deficit. Getting Iraq under control, making health care more affordable and improving domestic security also ranked high on their list.

"I think this whole situation -- terrorism and what's happening in Iraq -- affects companies, especially those with multinational operations," said Campbell Harvey, a Duke finance professor and the survey's founder. "Another terrorist attack on the United States would cause a sharp recession very quickly."

The CFOs said they're less concerned about the U.S. trade deficit, fractured relations with foreign allies, and the dollar's decline against the euro. Only one in five respondents said the high costs of fuel had resulted in new strategies to reduce consumption.

The CFOs represent private and public companies across a broad spectrum of the economy, including financial services firms, airlines, auto manufacturers and utilities. Financial services firms and utilities with nuclear power plants tend to be most concerned about the threat of terrorism, said Don Durfee, research editor for CFO magazine. Even if another attack does not occur, those companies are spending more on security and backup operations.

Duke and CFO magazine have conducted separate surveys for years. This was the first joint survey since they formed a partnership last month.

The CFOs were particularly cautious about hiring in the coming year.

They said employment at their companies will increase an average of only eight-tenths of a percent, a more pessimistic outlook than in September, when jobs were expected to grow by an average of 3.1 percent. The CFOs also are bracing for an average rise in health care costs of 8.4 percent.

Capital spending is projected to grow at a "replacement level" of 3.8 percent, said the survey's director, John Graham, a Duke finance professor. Worse still, Graham said, the CFOs predict their advertising and marketing budgets will rise only 2.3 percent, less than half of the growth expected three months ago.

As companies scale back hiring and spending plans, their earnings are expected to increase an average of 11 percent, down from 13 percent. Also, about half of the CFOs said year-end bonuses for employees will be smaller or the same as in 2003.

"These numbers suggest that the outlook for 2005 is more of the same, or maybe even a softening," Harvey said.

The survey's one bright spot: CFOs said their companies plan to contract out fewer jobs to countries with lower labor costs, though the reasons may not be encouraging. Harvey attributes fewer outsourced jobs to an expected drop in demand for goods and services, as well as the dollar's decline, which lessens the gap between production costs in the United States and elsewhere.

Staff writer Amy Martinez can be reached at 829-4884 or mailto:amartine@newsobserver.com



printer friendly

send story to a friend


Business

Bugs, bugs, go away

Triad suitors vie for Dell's hand

OPEC to cut output

Social Security: no new tax

Salix moving to bigger space

RBC Centura bank cut 150-180 jobs

Story Tools

Printer friendly

Send to a friend







Copyright 2004, The News & Observer Publishing Company
A subsidiary of The McClatchy Company
Help | Contact Us | Parental Consent | Privacy Policy | User Agreement
Hosting Partners of
newsobserver.com
Member of the
Real Cities Network