by Calculated Risk on 9/13/2006 07:36:00 PM

Reuters reports: CFOs see 33 pct chance of US recession in 12 months-survey

Chief financial officers of U.S. corporations are increasingly pessimistic about their business and the overall economy, and put the chance of a recession within the next year at 33 percent, a quarterly survey reported on Wednesday.

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.

CFOs are a key survey group to gauge future business investment and hiring. As the article notes:

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

"I would expect earnings, capital spending and hiring to go down," Graham said, adding his forecast covered the next 12 months.

"I'm not predicting they'll go negative, but I'm predicting they'll slow," he said.

Since most soft landing scenarios are strongly dependent on increases in business investment, this survey is very negative. Here are their concerns:

Sliding consumer demand tops their list of worries. Other major concerns include the rising costs of labor and of energy ...

Of course there has been some good news recently on energy prices; since the mini-spike last month due to the Alaska BP pipeline shutdown announcement, spot oil prices have fallen almost $13 per barrel to under $65 per bbl today. And gasoline prices have fallen too, and, as Dr. Hamilton notes: Gasoline prices will fall even more.

So perhaps falling energy prices will cushion the blow from the housing bust. But, even with the recent drop in energy prices, spot oil prices are still up 10% from the beginning of the year.