CFOs indicated a heightened sense of confidence in the U.S. economy and their own companies in the third quarter, according to a new survey.
The survey of 250 CFOs by Financial Executives International and Baruch Colleges Zicklin School of Business found that the CFO Optimism Index for the U.S. economy jumped from 41.9 in the second quarter of this year to 54.2 in Q3, a rating not seen since March 2008. The optimism index for CFOs own companies soared more than 12 points to 64.1 from the second quarters all-time low of 51.44.
The 250 CFOs who were surveyed foresee an improved outlook in their companies financial position, predicting an 11 percent increase in net earnings and a 6 percent increase in revenue. Over the next 12 months, they anticipate an increase in technology spending, along with the first uptick in hiring and capital spending reported in four quarters.
When asked to identify which actions taken in response to the downturn were most effective, 58 percent of the CFOs surveyed pointed to a reduction in work force. This was followed by retention of talent (22 percent), and redesigning products in order to lower cost (21 percent).
While only about 16 percent of respondents consider health care costs to be one of their top two economic concerns for 2009, CFOs are closely watching the debate over health care reform. Health care costs have consistently been one of the areas where CFOs forecast high increases in spending, predicting increases quarter over quarter since June 2004. This quarter, on average, they anticipate an 8 percent increase in health care costs at their companies over the next 12 months.
To offset these rising costs, the impact likely will be felt by their employees, as nearly 58 percent of CFOs say their companies are considering an increase in the employees share of monthly health care benefit costs. Another 20 percent are mulling over a decrease in the quality and scope of employee packages.
This quarters survey also explored CFOs opinions on the current health care debate. While nearly all of those surveyed (98 percent) said their company provides health care benefits as a standard part of its employee benefit package, a majority of CFOs (65 percent) do not believe benefits should be required. Among health care reform proposals by the current administration, the reduction in long-term growth of health care costs for businesses and government was CFOs No. 1 concern (58 percent), while flexibility for their employees to choose their providers was the second most-cited concern (41 percent).
The survey also revealed other reductions in employee benefits, with over a quarter of CFOs already having suspended or reduced their companys 401(k) match (29 percent), or reducing the number of work hours per week (26 percent). In addition, more than one in ten CFOs have implemented forced vacations (14 percent), frozen or closed pension plans (13 percent), or reduced the percentage of carryover vacation days (13 percent).
