CFOs' views on the U.S. economy deteriorated a bit in the secondquarter, even though their outlook is still far rosier than it wasa year ago. The quarterly survey of CFOs conducted by FinancialExecutives International and Baruch College's Zicklin School ofBusiness shows the CFO optimism index fell to 48.14 in the secondquarter from 53.60 in the first quarter, while CFOs' outlook fortheir own companies declined to 67.40 from 69.49.

Recent events are probably to blame for the deterioration insentiment, says John Elliott, Dean of Baruch College's ZicklinSchool of Business. “We saw the oil spill. We saw the Europeanfiscal crisis. We've seen concerns over the sustainability of Asiangrowth rates,” Elliott says. “You look at every one of thosefactors and they just add uncertainty.” The enactment of bothhealthcare reform and financial regulatory reform have compoundedthat uncertainty, he says.

The decline in the economic optimism index breaks a string offour consecutive increases. But the 48.14 reading in the secondquarter is still far higher than the 41.90 reading in the secondquarter of 2009, and other information in the survey also confirmshow far the economy has already come.

“When you go into the details about technology spending, capitalspending, revenue growth, earnings growth–those are allsignificantly above where they were a year ago,” Elliott pointsout. For example, CFOs expect their companies' tech spending torise 6.8% over the next 12 months, down from the 10.3% growth theyforecast in the first quarter, but well above the 1.95% increasethey cited in the second quarter of 2009.

There has been considerable coverage recently about the amountof corporate debt that will mature over the next few years. The 279CFOs who responded to the FEI/Baruch survey say that 20.5% of theiroutstanding long-term debt comes due in 2011 and another 17.4% willmature in 2012.

Elliott says the statistics on maturing debt were not as bad ashe had expected. “My sense is that a number of companies anxiousabout this debt maturing and the rush into the capital markets havebeen refinancing and extending things all year,” he says. “I thinkthe problem is less severe than it was six months to a yearago.”

Fifty-nine percent of the executives say they plan to pay offthe maturing debt with cash generated by the business, while 26%plan to sell new debt and 5% say they will issue new equity.

If companies do have to refinance, the credit markets seem to bein much better condition. Twenty-one percent of the CFOs expecteasier access to credit over the next six months, while 62% expectno change in their access to credit. “The markets have opened up abit,” says Marie Hollein, president and CEO of FEI.

In the wake of healthcare reform, the CFOs are predicting theirhealthcare costs will rise 10% over the next 12 months. That's downfrom the 12.23% increase they projected during the first quarter.The survey also shows companies are plotting their responses tohealthcare reform and the changes it will bring, with 66% planningto increase what employees pay for health coverage, while 34% planto make cuts in the company's health benefits.

“It looks like companies are going to respond to this healthcarelegislation, but also that they don't expect it to be as dire assome of us had expected six months ago,” Elliott says.

Of course, since then the Dodd-Frank Act added another item toCFOs' list of concerns. Forty-five percent of CFOs surveyed expectfinancial regulatory reform to boost their banking costs, while 39%say it is likely to boost compliance requirements and costs. And53% expect to see their taxes increase in the next 12 to 18months.

For more about the outlook for the U.S. economy, seeKeeping Expectations Real.