The depreciation of the U.S. dollar is having a less positive impact on capital spending and hiring than it is on sales, says a Duke University finance professor who directs a quarterly nationwide survey of chief financial officers.

According to John Graham, a professor at Duke's Fuqua School of Business, 20 percent of the surveyed CFOs said the depreciated dollar is increasing sales, but only 3 percent say it will lead to increased capital spending or additional hiring. Among firms with foreign sales that make up at least one-fourth of their total sales, 51 percent say the depreciated dollar will lead to increased sales; however, even among these firms, only one-in-10 says the depreciated dollar will increase capital spending or hiring.

"While the depreciated dollar will help sales revenue and earnings, these gains will unfortunately have little feedback effect on corporate spending and hiring plans," Graham said. "Our big concern is deflation because it would significantly hurt the already modest capital spending plans."

The CFO Outlook Survey, conducted by Financial Executives International and Duke's Fuqua School of Business, electronically interviewed 404 CFOs of U.S. companies the third week of June. CFOs from both public and private companies and from a broad range of industries, geographic areas and revenues were represented.

If deflation were to occur to the extent that overall prices decline by 2 percent per year, 40 percent of the surveyed companies say they would decrease capital spending and 46 percent say they would delay all spending.

"These views are consistent with the effects of deflation during the Great Depression," Graham noted. "If costs are expected to fall, then companies wait rather than spend now, because the cost of spending is expected to be lower in the future. This can in turn have negative effects on the overall economy, wages and hiring.

"Alan Greenspan has acknowledged the potential dangers of deflation, and we are confident that the Federal Reserve Bank is taking appropriate actions to keep deflation at bay."

Graham can be reached for additional comment at (919) 660-7857 or by email at john.graham@duke.edu.

More information about the CFO Outlook Survey as well as past CFO Outlook survey results are available at http://www.cfosurvey.org or http://www.duke.edu/~jgraham.