CFOs Losing Confidence: Is This a Self Fulfilling Prophecy?

CFO magazine’s survey of CFOs around the world reveal a confidence shortfall. I like the analysis because it concentrates on confidence and optimism levels which drive spending patterns of companies:

“Optimism reached its lowest point since the study launched it’s optimism index six years ago. Pessimists outnumber optimists by a nine-to-one margin, with 72 percent of finance chiefs more pessimistic about the U.S. economy than they were last quarter. Just 8 percent more optimistic.”

I completely understand the slide in optimism as compared to last quarter- but how severe is this? The lack of confidence seems driven by specific concerns:

“Weak consumer demand and turmoil in the credit and housing markets are the top macro-concerns of top finance executives. The high cost of labor ranked as the top internal concern.

Credit conditions have directly hurt 35 percent of companies through decreased availability of credit and higher interest rates (up 118 basis points on average). Sixty percent of the companies have put off expansion plans in response to credit market unrest.”

The good news is that 53% of those polled think that the US economy will hit bottom and begin an upturn by early to mid 2009 or sooner. I’m not sure what they base this on other than this is a mild downturn that can be handled by an underlying strong economic base.

Do you think we are in a recession? How much is this a confidence game vs. real structural problems?

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