Just when we thought the new normal might bear a passing resemblance to the old normal, along came August. The mid-month market meltdown revived talk of a double-dip recession, and left everyone looking for someone to blame.
We surveyed 300 CFOs on those issues the week of August 8, smack in the middle of the Dow's 634-point Monday drop and 430-point Tuesday rebound. As might be expected, their opinions ran the gamut regarding whether all that volatility was a marked overreaction, something that will resolve fairly soon, or symptomatic of underlying problems that will keep the markets suppressed for some time (see "Which response best characterizes your view of the Dow's recent dip below 11,000?" below).
There was more agreement when we asked them to frame that roller-coaster ride in a broader economic context — namely, are we going to have a double-dip recession after all? Nearly 20% said that, in fact, we are already in another recession, and 23% said we're heading for one, giving the bears a near majority. The single most common response, however, was "probably not," but only 11% of respondents were confident enough to give a firm "no."
Whether or not CFOs see fit to toss around the "R" word, they see plenty of cause for long-term concern. As Robert Daleo, CFO of Thomson Reuters, notes, "I don't think a double-dip recession is inevitable, but I think the bigger issue is that we face economic weaknesses this time around that we didn't face in 2008, such as a high unemployment rate, Europe in trouble, and the government having used up many of its response options. Longer term, most Western economies need to take stock of what they can and can't afford to do. That's a painful process. There are structural changes underway that will take decades to work out."
In the heat of the moment, companies seem unsure just how to work them out. While only a handful of finance chiefs told us that the August plunge had sent them running back to the recession playbook, almost a third said that they had never put the playbook away, while a slightly larger number said they would stick to their current growth strategy; a quarter said it was too soon to know how to respond.
There was, however, one thing on which everyone could agree: Washington is at fault. More than 90% of respondents said that federal lawmakers are either "extremely responsible" (the choice of 71% of respondents) or "moderately responsible" (23%) for the current state of the economy.