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CFOs see bleak business prospects

Roy Harris | Nov. 11, 2011
CFO concern about overall U.S. business conditions remained extremely high in October, according to the monthly survey results just in from corporate-finance services and recruiting firm Tatum.

CFO concern about overall U.S. business conditions remained extremely high in October, according to the monthly survey results just in from corporate-finance services and recruiting firm Tatum.

The overall business-conditions index that Tatum has established to reflect numerous factors actually increased in October -- to 1.8, from the two-year low of 1.7 in the prior month. Still, Tatum considers a 2.0 to 3.0 range as representing zero economic growth. And the September results, which Tatum had called "sour," showed a disturbingly sharp drop in the way CFOs perceived business condtions.

For the next 60 days, 36% of respondents expect an improvement in business conditions, compared with 37% in the prior month.

"Have we entered into another recession?" ask the analysts from Tatum, the executive services and search firm that specializes in the corporate finance function. "Our survey respondents seem to expect it and are reacting accordingly."

Stagnation at Two-Year Low Levels

Whether another recession develops or not, says Tatum of the latest October results, the stagnation of the numbers at levels that prevailed during the recessionary depths two years ago shows that "our respondents are reporting low-to-negative growth and are reacting accordingly."

Noting that September respondents had at least indicated that they intended to raise their cap-ex, and to increase hiring, for example, Tatum said that in October such commitment had dissolved.

Among the 111 finance executives across the country who participated in the survey --- mostly from small or medium-sized businesses --- 19% said they had committed higher amounts to capital spending, down from 23% in the previous month. Those who said they committed less climbed to 22% from 16%. Looking ahead, the question about cap-ex expectations for the last two months of 2011 similarly showed a decline in the percentage of CFOs planning to spend more.

Meanwhile, the percentage of respondents hiring additional employees fell sharply, to 15% in October from 22% in the prior month, and those saying they higher fewer workers increased to 18% from 16%. Those saying they would increase hiring by year-end fell to 24% from 27%.

Better Out West?

The Tatum results, broken down by geographic region and by industry, suggested that the Pacific and Northeast reflected some improvement overall, while the rest of the nation --- and particularly the Southeast --- was weakening. Results showed the services sector remained the strongest in October, as in September, with manufacturing "by far the weakest among the significant reporting segments."

"We believe that uncertainty, political and economic, domestic and international, is the major factor causing business leaders to be particularly cautious in making commitments for new hiring and for capital expenditures," Tatum senior partner Sam Norwood, who co-wrote the report, says in an email to CFOworld.

 

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