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CFO Survey


Spending Forecasts Largely Unchanged

Pension Protection Act Impacts 401(k) Plans

FLORHAM PARK, N.J. and NEW YORK, October 3, 2006 — Despite reported recession fears, CFOs’ economic optimism dropped only slightly in the third quarter to 67.6, compared to 68.6 in the second quarter, according to the “CFO Outlook Survey,” conducted quarterly by Financial Executives International (FEI) and Baruch College’s Zicklin School of Business. Company-specific optimism declined even less, to 75.5 from 76.3 last quarter.

Seventy-three percent of the CFOs surveyed expect capital spending to increase at their companies in the coming year, at a weighted average rate of nearly 8%, very close to last quarter’s forecast. Technology spending forecasts were virtually unchanged at nearly 7%. Anticipated health care spending declined from 8.4% to 7.7%, and hiring fell from 4% last quarter to 3% for the third quarter.

“CFOs are less gloomy than the media suggest,” said John Elliott, Dean of Baruch College’s Zicklin School of Business. “They foresee a healthy 11% growth in profits on average, and their responses suggest they are staying on course rather than being distracted by economic uncertainty. That kind of determination could be a strong counterbalance to the forces threatening a more serious downturn.”

Competition was the biggest worry for the companies surveyed, cited by 29% of respondents as their first or second worry. Consistent with their competition concerns, 36% of those surveyed expect their companies to spend more on product investment in the next year, while 43% anticipate reinvesting more in the company.

Inflation Concerns, Prices Ease
Inflation took a back seat to recession as a concern for CFOs this quarter. Sixty-one percent of respondents said they were moderately to very concerned about recession, while 59% were moderately to very concerned about inflation, compared to 77% last quarter. Seventy-one percent expect their companies to raise prices on their products, down from 76% last quarter. The average increase forecast fell to 2.5% from over 3.0% in June.

Good Help Still Hard to Find
More than half the survey respondents said their companies are looking for talent in the finance department, with over 90% saying they are having moderate to extreme difficulty filling mid-level and senior positions. “The need for experienced finance professionals continues to increase,” said Colleen Cunningham, President and CEO of FEI. “Companies know that the quality of their financials today has a significant effect on their competitive position.”

Pension Protection Act Affects 401(k) Plans
Eighty-nine percent of responding firms offer 401(k) plans. As a result of the Pension Protection Act, 28% of these firms have made or plan to make changes based on the law’s provisions, while another 33% have not made a decision yet and 39% anticipate no change in the near term.

Firms that are open to change are most likely to add automatic enrollment (38%) while offering investment advice and adding Roth options are each under consideration for about 22% of these firms. The most common default investment options for auto enrollment will most likely be money market funds (33%), but rebalancing asset allocation funds are a close second at 29%. The Guaranteed Investment Contract (GIC) will be the most likely default option at only 4% of the companies.

About the Survey
Full survey results will be available October 5 at For the full results prior to that, please contact

This quarter, the CFO Outlook Survey, conducted by Financial Executives International and Baruch College’s Zicklin School of Business, interviewed 171 corporate CFOs electronically the week of September 18. CFOs from both public and private companies and from a broad range of industries, revenues and geographic areas, including some off-shore companies, are represented. Survey respondents are members of Financial Executives International.

Revenue-weighted averages are provided for projected changes in capital spending and for projected price increases. An employee-weighted average is provided for the projected changes in health care costs and hiring.

FEI has been conducting surveys gauging the country’s economic outlook from the perspective of CFOs for the past nine years.

About FEI
Financial Executives International (FEI) is the leading advocate for the views of corporate financial management. Its 15,000 members hold policy-making positions as chief financial officers, treasurers, and controllers. FEI enhances member professional development through peer networking, career planning services, conferences, publications, and special reports and research. Members participate in the activities of 86 chapters, 75 of which are in the United States and 11 in Canada. For more information about FEI, visit

About Baruch
Baruch College, founded in 1847, is a senior college of the City University of New York. The Zicklin School of Business at Baruch College is the largest collegiate school of business in the nation, producing graduates who assume leadership positions in all areas of American business as well as conduct important academic research. Baruch has one of the largest accounting programs in the country whose graduates become practicing CPAs.


Andrew Healy
Chris Allen

John Elliott
Baruch College