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Jul 30

CFOs more pessimistic, cautious about spending

Posted by Stephen Taub in Financial Executives InternationalFEICFOsCashCareers/Managementcapital expendituresBaruch College's Zicklin School of Business

Stephen Taub

The Federal Reserve recently reported that nonfinancial companies had $1.84 trillion in cash and other liquid assets as of the end of March, up 26 percent from the prior year and the largest sum since 1952, when these kinds of records began to be kept.

So, various interest groups have been urging companies to spend this money-on dividends, buybacks, acquisitions, additional employees.

However, don't count on any of this happening soon. It seems that chief financial officers, the ones who know best whether it is a good idea to open a company's coffer, are currently a gloomy group.

According to the latest quarterly survey from Financial Executives International (FEI) and Baruch College's Zicklin School of Business, CFO optimism fell for the first time after four straight quarterly increases.

This is underscored by the fact that more than two-thirds (69 percent) of them said they are still spending cautiously or holding off on all or nearly all capital investments.

The reason for this skittishness: CFOs are mindful they face a number of new expenses that are beyond their control.

For one thing, more than half (53 percent) of the CFOs who participated in the survey predicted their taxes will increase.

When asked about the potential impact the financial regulatory reform package would have, the most-cited effect was increased banking costs (45 percent), followed by additional compliance and reporting requirements and costs (39 percent).

Meanwhile, the survey found that CFOs are anticipating a 10 percent increase in healthcare costs over the next 12 months. The same time last year, they anticipated only a seven percent increase.

"The quarterly CFO Outlook Survey has shown that, while the worst is likely behind us, CFOs

are still being prudent when navigating their companies fully out of the recession," said Marie

Hollein, President and CEO of FEI. "With unemployment levels still high, it is not surprising that

CFOs have retracted some of the economic confidence they expressed earlier this year."

Despite this gloominess, the 279 CFOs who responded to the survey did say they plan to increase hiring by 7 percent over the next 12 months. But, given their pessimism, it is hard to believe they will begin the process anytime soon.

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