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NEW YORK (CNN/Money) -
Former WorldCom officers Bernard Ebbers and Scott Sullivan aren't the only executive duo bickering this year ... chief executives and chief financial officers in general are at odds over business confidence and capital spending, according to a pair of recent surveys.
Chief executives at top companies said they will ramp up capital spending in the next six months, according to a survey by the Business Roundtable. But chief financial officers want to hold those purse strings tight, said a separate report that found business confidence down among top CFOs.
"This is a sound contradiction because CEOs should be the visionaries and CFOs should be the bottom line worrywarts," said Michael Darda, chief economist at MKM Partners. "Financial officers should be worrying about all of the costs, the pitfalls and the risks."
CFO gloom
Inflationary labor costs and the depreciating dollar will hurt economic growth in the coming year, said a survey of chief financial officers conducted by Duke University and CFO Magazine.
"While there are still more optimists than pessimists, this is the least optimistic that CFOs have been in the last two years," said John Graham, survey director and professor of finance at Duke's Juqua School of Business.
Business optimism among CFOs has dropped steadily over the last year, with 46 percent of those surveyed more optimistic about the economy than they were last quarter, the report said.
The findings also said 55 percent of CFOs were more optimistic in each of the last two quarters, and more than 70 percent were optimistic three quarters ago.
Meanwhile, the Business Roundtable, a group of CEOs from large U.S. companies, said its Economic Outlook Index rose sharply for March to a record high of 104.4, from the December reading of 98.9, reflecting increased capital spending plans and confidence in further economic growth.
Analysts and economists said the case of optimistic chief execs and pessimistic financial guys is not necessarily a bad thing, either, since a good CFO will badger his boss into keeping corporate spending and debt in check.
"If what we see in these surveys is truly the case, then there will be a clash in the boardroom as these two decide how best to move the company forward," said Stephen Stanley, chief economist with RBS Greenwich Capital.
Profit party over?
The Business Roundtable found that 60 percent of CEOs planned to increase capital spending, one of the factors that can help sustain economic growth, in the next six months. That compared to 50 percent in the December survey.
However, CFOs said capital spending growth and earnings will slow over the next year due to the falling dollar, energy costs and an increasingly competitive economic environment.
"The conventional wisdom, especially out of Washington, is that a weaker dollar helps U.S. businesses," said Campbell Harvey, a finance professor at Duke. "However, that's not what Main Street is telling us."
Forty-seven percent of CFOs said the depreciating dollar will hurt their companies as rising material costs on imports cannot be passed on to the consumer.
But MKM Partners' Darda said there will be a slowing of corporate profits in the coming year no matter how optimistic or pessimistic Wall Street's top execs are, as a time of historically high earnings naturally slows.
"You just can't have 30 percent growth every quarter," said Darda.
Bad news for labor
While company heads may not agree about corporate income, all are worried about rising labor costs.
Only 36 percent of CEOs said they planned to increase employment in the next six months, down slightly from the 40 percent that said in December they would boost hiring. And 46 percent of the CEOs surveyed planned to keep staff levels steady, up from the 40 percent that said the same in December.
More than 20 percent of CFOs said rising labor costs are a moderate or major problem at their companies; and 69 percent said that unit labor costs are increasing. Fewer than half of CFOs expect employment to grow at their firms, compared with 60 percent who expected growth last quarter.
"Federal Reserve Board Chairman Alan Greenspan recently stated that increases in unit labor costs would be one of his major concerns if productivity falls as he anticipates," Graham said.
Economists agreed that the surveys are good indicators of sentiment, but not necessarily tell-all readings of corporate health.
Stephen Stanley, with RBS Greenwich Capital, said if you want to get a sense of the health of Wall Street and Main Street, it's best to pay attention to the market sensitive indicators.
"The bottom line is that it's best to look at what the companies are actually doing rather than pay too much attention to what they're saying," added Darda.
And at least this CEO and CFO divide, unlike the WorldCom debacle, isn't in court.
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