US Corporate Executives Expect Higher Prices in the Next Year
Durham, North Carolina, July 6 (Bloomberg) -- Higher labor costs will force companies to raise prices an average of 3.5 percent over the next year, according to a survey of U.S. chief financial officers.
The survey by Duke University and Financial Executives Institute shows that 73 percent of CFOs expect to raise prices this year, with the biggest increases in the energy, transportation and technology industries. Wages will rise at a mean rate of 5 percent during the next 12 months, and health-care benefit costs will increase 8 percent, the survey showed.
The survey, conducted quarterly by FEI and Duke's Fuqua School of Business, polled CFOs from more than 4,000 U.S. companies during the week of June 14.
The survey suggests that U.S. companies are expecting to boost prices at an accelerated pace. Six months ago, U.S. CFOs said they expected price increases averaging only 2.2 percent; a year ago, they expected only a 1 percent boost in prices.
The executives said higher borrowing costs have hurt their businesses in three ways: 26 percent said rising rates have diminished consumer demand for their goods, 20 percent said they have scaled back borrowing and 16 percent said they have reduced capital spending.
Yet, the outlook for profitability remains strong. CFOs forecast that earnings growth will rise an average of 18.4 percent, thanks largely to improved worker productivity, which is expected to rise, on average, 4 percent in the next 12 months.
At the same time, they expect the Standard & Poor Index of 500 stocks, a broad gauge of the market value of large U.S. companies, to return 8 percent during the next 12 months.
That represents only 2 percent more than the yield on risk- free 30-year U.S. Treasury bonds, or less than the historical average of 7 percent, said John Graham, associate professor of finance at Fuqua. That suggests corporate executives feel bonds are a better investment than U.S. stocks.
``They're optimistic about their own company, but they don't know what to expect from the economy at large,'' said Graham.
Jul/06/2000 12:11 ET |
