Optimism slipping say corporate CFOS.

• Position: YOUR LIFE

Chief financial officers fear that inflation will rise when Federal Reserve Chairman Alan Greenspan steps down this month and are pessimistic about the U.S. economy. Moreover, although high fuel costs are the No. 1 concern reported by U.S. corporations, only a minority have attempted to increase fuel efficiency.

Other top issues include escalating health care costs and increasing interest rates. In addition, CFOs foresee only modest employment growth for the coming year, and 20% say they expect to reduce employment even though solid earnings growth is anticipated.

The year-end 2005 Duke University/CFO Magazine Business Outlook survey reveals that, relative to the low inflation of the last decade of the Greenspan era, 81.5% of CFOs believe that inflation will be higher during the next 10 years. The executives predict their companies will raise prices by three percent in 2006, continuing an upward trend over the past year.

"The pivotal result in the entire survey is the CFOs' perceptions of inflation in their own product prices. The doubling of inflation expectations over the past year is a disturbing trend," notes Campbell Harvey, professor of finance at the Fuqua School of Business, Duke University, Durham, N.C., and the founding director of the survey. "There is a strong asymmetry in inflation expectations: 81.5% of respondents think...