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US CFO optimism at record level in Q1'18 on tax reform

Business optimism among U.S. corporate finance chiefs reached its highest-ever level in the first quarter of 2018 on the back of federal tax cuts, Bloomberg News reported, citing the results of the quarterly Duke University/CFO Global Business Outlook survey.

The measure of CFO optimism in the U.S. economy rose to 71.2 in the first quarter, up from 69 on a 100-point scale in the last quarter of 2017 and the highest level since the survey began in 1996.

Two-thirds of executives surveyed said tax reform has had a positive effect on their companies, with 36% of respondents describing the overall benefit as medium or large. U.S. President Donald Trump signed the tax reform law in December 2017 which reduced the corporate income-tax rate to 21% from 35%, with the effective rate for companies expected to fall to 18.8% from 24%, according to the report

The survey showed that 44% of companies are planning to raise wages more than than they would have done without tax cuts. Some 38% of executives said that their companies are planning to add more capacity while 31% reported looking into boosting their cash holdings. Among companies with defined benefit pensions, 28% said that they will raise pension contributions.

"Our analysis of past results shows the CFO Optimism Index is an accurate predictor of future economic growth and hiring, therefore 2018 looks to be a very promising year," Duke University Professor John Graham said.

The Global Business Outlook survey is jointly conducted by Duke University's Fuqua School of Business and CFO magazine.