Survey Finds: U.S. Recession has Already Started

Also see: U.S. Stocks Retreat on Recession Concern

A U.S. recession has already started and the downturn is likely to last longer than in the recent past, with the economy recovering only late next year, according to a quarterly survey of corporate finance chiefs released today.

Fifty-four percent of the CFOs said the United States is in recession, and another 24 percent said there is a high likelihood of one starting later this year, according to a Duke University/CFO Magazine survey completed on March 7.

Nearly three-quarters of the CFOs said they were more pessimistic this quarter than in the prior quarter about the U.S. economy, reflecting concerns about consumer spending, turmoil in credit and housing markets, and high energy prices.

An index of optimism, which rates the economy on a 1 to 100 scale, is at 52, the lowest in the seven-year history of the index, the survey found.

"The last two recessions lasted only eight months," said Duke professor Campbell Harvey, founding director of the survey. "In contrast, 90 percent of the CFOs do not believe the economy will turn the corner in 2008. Indeed, many of them believe it will be late 2009 before a recovery takes hold."

In response, companies are scaling back plans for capital spending and are not planning significant hiring, in part because of high labor costs, according to the survey, which has been conducted for 12 years.

Most CFOs said interest rate cuts by the U.S. Federal Reserve have had no impact on their business, and more than a third said credit conditions have directly hurt their companies by making capital tougher to get and more expensive.

The survey included responses from 1,073 CFOs, including 475 based in the United States.

Those polled in Europe and Asia have also grown more pessimistic about economies in their regions, while two-thirds of Chinese CFOs said they are concerned about U.S. recession hurting their profit margins or demand for their exports.

The CFOs in the survey largely agree with the view of economists, as polled by Reuters.

A Reuters poll today found a 60 percent probability of a U.S. recession this year, up from 45 percent in a February poll. They forecast no economic growth for the first quarter, down from an earlier estimate of 0.2 percent growth. The poll also found higher expectations for U.S. inflation this year.