CFOs See 33% Chance of Recession in 12 Months

A recent survey of U.S. CFOs puts the chances of a recession in the next 12 months at 33%. This indicates that top management at many U.S. firms are becoming more pessimistic about the future of the economy. This measure of pessimism is the highest it has been in five years.

The level of pessimism about the U.S. economy is the highest in five years, the survey by Duke University and CFO Magazine found. Fewer finance chiefs expect to increase capital spending, their forecasts for earnings growth are lower, and expectations for hiring are down, the survey found.

The survey, which polled 571 CFOs at both public and private U.S. companies, found the average probability of a recession was one-third.

The 10-year old survey has been a strong leading indicator of corporate results and behavior, said survey director John Graham.


The proportion of executives saying they are more optimistic about the economy — 19.8 percent — is down from 24 percent in the previous survey and down from 42 percent six months ago.

Sliding consumer demand tops their list of worries. Other major concerns include the rising costs of labor and of energy, the survey found. A third expect to cut back on hiring if consumer demand weakens, and nearly as many — 29 percent — will reduce capital spending.

This is consitent with this news report about economists views of the economy.

BOSTON (MarketWatch) — The U.S. economy should slow significantly through 2007, but with just a one-in-four chance of falling into a recession, a group of business economists said Monday.

“Growth is not as robust as it was in the spring, but the economy is by no means going dormant,” said Carl Tannenbaum, president-elect of the National Association for Business Economics and chief economist for LaSalle Bank/ABN Amro in Chicago.

The survey of 50 NABE members concluded that the economy would likely slow to a rate of 2.6% growth in the second half of 2006 and 2.8% in 2007. The economy grew 3.1% in 2005.

The big concerns mentioned by the surveyed economists are higher energy prices (46%), higher interest rates (22%) and declining home prices (20%).

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Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.


  1. Digger says:

    I was going to post “there was 33% chance of a recession,” the CFO’s said “then they added there was 34% chance of things remaining the same and 33% chance of things getting better, just to cover all the bases.”

    but you posted too much of the article…damn you Steve!!!

  2. AW says:

    Energy prices, at least oil and natural gas, are coming down. The Fed has stopped raising rates and it increasingly looks like the next moves are down. Home prices will stabilize as rates come down. So let’s check back in 3-6 months and see how the CEOs feel.

    That said, some more stimulation of the economy through tax cuts certainly wouldn’t hurt.