CFOs: Recession Has Already Started

Let the economists, pundits, strategists and talking heads debate all they want. CFOs — the people in charge of Corporate America’s finances  — have already weighed in. These are the folks who have the greatest influence in corporate hiring and capex spending have made their views known in a recent Duke University/CFO Magazine survey completed on March 7.

What did the CFOs say?  "A recession has already started and the downturn is likely to last
longer than in the recent past, with the economy recovering only late
next year."

Here are the highlights of the CFO’s views:

• 54% said the US is in recession; another 24% said there was a high likelihood of one starting this year.

•  Nearly 75% of the CFOs were more pessimistic this quarter than the prior quarter;

• Companies are scaling back plans for capital spending and are not planning significant hiring;

• Most CFOs said interest rate cuts by the U.S. Federal Reserve have had no impact on their business

• One third said credit conditions have directly hurt their companies by making capital tougher to get and more expensive;

• The Duke U index of economic optimism is at 52 (1 to 100 scale) — the lowest in the seven-year history of the index;

• CFOs in Europe and Asia have grown more pessimistic about economies in their regions,;

• Two-thirds of Chinese CFOs said they are concerned about U.S. recession hurting their profit margins or demand for their exports;

It is interesting to note that the CFOs see this recession as different from the past two — the short shallow contractions of 2001 and 1990. Both of those lasted ~eight months. Duke
professor Campbell Harvey said: "In
contrast, 90 percent of the CFOs do not believe the economy will turn
the corner in 2008. Indeed, many of them believe it will be late 2009
before a recovery takes hold."

The CFO survey further points  out the absurdity of the claims that "There is no credit crunch."

Here is Duke’s the Economic Optimism Index:



Global CFO Survey: Recession in 2008, no relief until 2009
Duke University, 4:40 p.m. EDT Wednesday, March 12, 2007

Recession has already started, CFOs say-survey

Nick Zieminski
Wed Mar 12, 12:38 PM ET;_ylt=AqmYgCD_1j51u_Mtk94oasoE1vAI

Portfolio Strategy | Crunch Mythology
Ken Fisher
Forbes 03.24.08, 12:00 AM ET

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What's been said:

Discussions found on the web:
  1. JustinTheSkeptic commented on Mar 13

    Now, finally they are starting to see the real picture. Dow 10,000? 9,000? 8,000?

  2. bluestatedon commented on Mar 13

    I’m confused — Karl Rove and a few commenters here have said all this recession talk is nonsense whipped up by the liberal media in its ever-present mission to harm America. Are these CFOs just spending too much time reading the socialist writers at the New York Times? Perhaps sending a few of them off to Gitmo for a liquid re-education session might get them to see the bright and happy truth about the economy.

  3. wedwarsd commented on Mar 13

    And for anyone else who thinks that the recovery will be shallow, consider that:

    1) The credit crunch will increase corporate financing costs which haven’t fully been reflected in future expected earnings. Expect earnings during April to be much weaker than expected.

    2) The failure of the term auction facilities will affect not only corporates (see first point) but also municipal/state governments who will also have their financing costs rise. A cutback by governments in spending (capital spending, employement, etc) will further aggravate the situation.

    3) Hank Paulson is beating the drum about having greater regulatory oversight of mortgage/credit lenders. The credit taps have not only been closed shut, they are being welded tight as we speak!

    Any way you look at this, the recession will be a long, deep one to remove the excesses of the last seven years!

  4. ceo commented on Mar 13

    Is Paul Craig Roberts wrong?

  5. Mr. Obvious commented on Mar 13

    The CFOs are obviously in bed with the US media and are doomsters, too.

  6. jd commented on Mar 13

    i saw his article too. agruing if we are in a recession is a mute point. if cfo’s and consumers beleive we are in a recession their spending behaviors will change. when they turn the tv or read the paper all they hear is recession credit crunch 110 oil inflation negative job reports this will
    induce people to tighten thier belts and
    companies to cut cap ex making the situation worse

  7. ken h commented on Mar 13

    I currently run a business and IMHO we go into a death spiral if energy and commodities are not brought under control, period. But who am I? Simple math, less profit, more cost=less jobs.

    the writing is on the wall and I don’t need anybody to tell me diffferent but I guarantee the Kneale types will be more than happy to leave reasonable doubt. I believe you better batton down the hatches.

    I really beleive the Paulson/Greenspan types should be investigated and charged. There were a multitude of blogs calling for this scenario years ago. You can’t tell me these two and heir cronies didn’t know what was going on. IMO, they have put our country in major jeopardy.

  8. lurker commented on Mar 13

    “Paulson: Time to Toughen Rules on Mortgage Brokers- Reuters”
    Phew! I feel so much better now. That game has been over for more than a year after running for more than 10? but it is time to “toughen the rules!!!” Is Paulson really that stupid or does he just think we are. I hear Nixon resigned too! Sheeeesh.
    Wow! that is the most deeply frightening headline I have read in…..a week I guess.

  9. bluestatedon commented on Mar 13

    “if cfo’s and consumers beleive we are in a recession their spending behaviors will change.”

    JD, do you believe that consumers are actually in decent personal financial shape wrt to income, debts, health care, mortgage costs, credit card, higher education, and the like? That if they would just stop paying attention to media talk about recession that things would be fine?

    Or is it just possible that consumers are cutting back because they don’t have enough money to do anything but cut back?

  10. Greg0658 commented on Mar 13

    Sec Paulson asks for ideas

    advance announcement Jan 1 2009
    (if not to late)

    1 trade per day per stock per client

    get real jobs

    invest as a second income not primary

  11. JustinTheSkeptic commented on Mar 13

    jd, they have to tighten their belts more, to think otherwise is ignoring reality. The media, has been putting lipstick on this pig for over three years now. Mr. Larry Kudlow, has been nothing but a cheerleader. For that matter, the whole CNBC crew does nothing but promote the “half-full,” stories. Little Erin, should be called Erin, “let’s find the silver-lining,” Bernnet!

  12. Douglas Watts commented on Mar 13

    I’m one of those weirdos. I tend to spend less when I’m broke.

  13. jd commented on Mar 13

    i beleive the consumer is finally tapped out
    people have been saying this for years and the conusmer has always come back but it like the boy who cries wolf people have been so complacent to hearing it that when
    it actauly haapens they do not beleive it.

    in 2000-2003 we had a business recession as the consumer kept spending thanks to the fed allowing them to use thier homes as
    personal atm cards

    we have not had a consumer recession since 90 but we do now

  14. Carmen commented on Mar 13

    What’s troubling about this consumer led recession is that unemployment is heading higher, as the CFOs are hinting. Would love to see how the future gov statistics match up with that outlook.

  15. TempusFugit commented on Mar 13

    CFOs are, in general, scardy cats. What is amazing is not that “one third said credit conditions have directly hurt their companies by making capital tougher to get and more expensive” but that two-thirds didn’t!

  16. The Big Picture commented on Mar 14

    Economists Say Recession Has Arrived

    We just mentioned the CFO’s saying the same thing yesterday. Worth watching . . . Source:Most Economists Say Recession Has Arrived as Outlook DarkensPHIL IZZOWSJ, March 13, 2008

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