Jim Kaitz

Financial Executives Institute

(202) 659-3700

Cabell Smith

The Fuqua School of Business

(919) 660-7722

Survey Counters Fed Chairman's Expected Caution:

Financial Executives Say Economy Can Sustain Faster Growth

DURHAM, N.C., July 17, 1996 -- As observers and analysts anticipate tomorrow's testimony by Federal Reserve Chairman Alan Greenspan before the Senate Banking Committee, final results of a new survey of corporate financial executives run counter to the chairman's expected cautious approach to economic growth.

The survey, conducted between June 24 - 28 by the Financial Executives Institute (FEI) and Duke University's Fuqua School of Business, was faxed to 2,849 chief financial officers who are members of FEI, an association of senior corporate financial executives from a cross-section of U.S. businesses. Six hundred seventy-seven responses were tallied, a response rate of 25 percent. Preliminary results of the survey were released on July 2.

"These findings send a clear message to the Federal Reserve: Fear of the economy overheating and setting off an inflationary spiral are unfounded," said Fuqua Professor Michael Bradley, who co-directs the quarterly survey. "Corporate America believes that we can have significant economic growth without inflation. More than 60 percent of respondents disagree with the contention that the U.S. economy cannot sustain growth greater than 2.5 percent without risking increases in inflation. This is in sharp contrast to the views of many policy-makers, especially those at the Fed."

"Corporate America is more bullish on the economy than Chairman Greenspan and most of the economists recently quoted in The Wall Street Journal," said Campbell R. Harvey, professor of finance and study co-director. "More important, the specter of inflation -- frequently mentioned by many economists as the single


greatest threat to economic growth -- does not loom large for those responding to our survey. The executives predict that real GDP will grow by 2.43 percent and inflation to be 2.86 percent for the next year."

According to survey results, corporate earnings will increase in the next quarter and over the next year. The survey indicated that 82 percent of the financial executives expect earnings to increase over the next year and only eight percent foresee lower earnings. More than 20 percent of the corporations expect to increase dividends over the next four quarters and 68 percent thought it was unlikely that their dividend would change. The survey also investigated employment plans, and capital investment and research and development expenditures. Sixty-two percent of the respondents said that employment will increase at their firms, 66 percent see increased capital investment and 36 percent foresee a hike in research and development expenditures. "Our survey results are more an advanced warning of what will happen than a prediction of what might happen," said FEI President P. Norman Roy.

Detailed analysis of the survey results can be found on the Internet at:


This site also contains results from additional questions regarding growth and inflation forecasts.

About FEI

FEI 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 U.S. and Canada.

About The Fuqua School of Business

The Fuqua School of Business at Duke University, founded in 1970, is a leading center of management education and research. In addition to its highly ranked degree programs, Fuqua offers unique and innovative global business education programs for working managers and executives worldwide.