Contact: Kathy Pitman, Duke-Fuqua, (919) 660-8090 or Chris Allen, FEI, (973) 898-4658

CFO SURVEY: Big Changes Predicted for the Economy by 2025

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ALSO: Most Firms Willing to Pay a Premium to Hire in Today's Tight Labor Market;

Health Care Costs Expect to Jump 8.9 Percent in 2000, While Prices to Rise 2.2 Percent

DURHAM, N.C., Dec. 20 — A new poll of 277 companies predicts dramatic monetary and business changes for the U.S. economy during the next 25 years. Only 22% of corporate executives expect that their companies will exist in their current form in 2025, according to the latest Financial Executives Institute/Duke University Corporate Outlook Survey, conducted the week of Dec. 13. One out of four think is unlikely, and another 53% think it highly unlikely, that their firms will remain unchanged.

"The biggest changes are anticipated among high-tech and banking and finance firms," says John Graham, a finance professor at Duke University and the director of the survey. "More than 80% of high-tech and finance companies expect that it is unlikely or highly unlikely that their firm will remain in their present form in 2025." Small firms also anticipate big changes: 81% of firms with revenues less than $100 million think that it is unlikely or highly unlikely that their firms will remain in their present form in 2025.

The CFOs predict other big changes for the U.S. economy: 37% of the executives think that it is likely or highly likely that the U.S will have a shared currency with Canada by 2025. Only 30% say that a shared currency is not at all likely. Moreover, 17% of the CFOs predict that it is likely or highly likely that the U.S. and Mexico will share a common currency, although 53% think that this occurrence is highly unlikely.

Y2K preparations

CFOs expect that firms will increase inventory in anticipation of potential year 2000 problems, and 21% of the respondents say that they expect to pay between 5 to 10% more for raw materials because of Y2K. Another 1.5% expects to pay a 10% premium for raw materials due to Y2K.

Very tight labor market

Seventy-seven percent of firms would like to increase employment in the next year, with a 5% median increase in the number of employees. Moreover, 89% of the executives say their firms are having a hard time hiring skilled workers, relative to their hiring experience from five years ago. Hiring is difficult enough that 86% of the CFOs said they are willing to pay a premium to hire skilled workers. "The tight labor market is impacting all sectors of the economy, no industry is immune," notes FEI President and CEO Phil Livingston. "It’s most evident among high-tech firms, with 93% of high-tech CFOs saying that finding skilled workers is difficult compared to five years ago, and the same percentage saying they are willing to pay a wage premium." The retail/wholesale and banking/finance industries are also experiencing tight labor market conditions, with nine out of ten firms having a hard time finding skilled workers even though they are willing to pay a wage premium.

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Wages and health care costs

The CFOs expect wages will increase at a mean rate of 4.8% during 2000 in response to the tight labor market. Wage increases will be largest in the high-tech industries, with a mean increase of 7.9%.

Health-care costs are expected to continue accelerating in 2000, with a mean increase of 8.9%. High-tech and banking/finance firms are apparently trying to lure skilled workers by improving health benefits. High-tech firms expect health-care costs to increase by 11%, and banking firms expect them to increase by 10%.

Productivity

Inflation

Capital Expenditures

 

About the Survey

The survey is conducted quarterly by FEI and Duke University’s Fuqua School of Business. Each survey polls a cross-section of CFOs from more than 4,000 U.S. companies. The current survey was conducted during the week of Dec. 13, 1999. Complete survey results are available on the Internet at:

www.duke.edu/%7ejgraham

About FEI and Fuqua

Financial Executives Institute is the leading advocate for the views of corporate financial management. Its 14,000 members hold policy-making positions as chief financial officers, treasurers and controllers at 8,000 companies throughout the United States and Canada. For more information, visit www.fei.org.

The Fuqua School of Business at Duke University was founded in 1970. Fuqua’s mission is to provide the highest quality education for business and academic leaders and to promote the advancement of the understanding and practice of management through research.

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