CFOs in the US are optimistic about the economy and financial prospects, according to a CFO Outlook Survey by Finance Executives International (FEI) and the Baruch College in New York.
According to the survey capital spending is expected to increase at two-thirds of companies over the next 12 months, with the increase averaging 4.3%.
Eighty-seven per cent of firms predict earnings will grow, with the increase averaging 13.2%. While still positive, these capital spending and earnings growth expectations are lower than reported last quarter.
Campbell Harvey, professor of finance at Duke University and founder of the survey, says: ?The CFOs are telling us that there are growing risks to a continued recovery. In addition to dampened capital spending growth, employment is expected to grow by only one per cent next year, a notable worsening of the employment expectations expressed by CFOs just last quarter. Our analysis of this quarter?s survey suggests the economic situation is growing more fragile.?
The survey asked executives from both public and private companies to select the top three risks, from a list of 10, that could affect their company in the coming year. ?The threats to the economic recovery are more acute than have been characterized by Wall Street pundits, with domestic terrorism and increasing interest rates at the top of the list,? noted Harvey.
According to the survey results, the most significant risk to the U.S. economy is domestic terrorism. Fifteen per cent of respondents rank the situation in Iraq as one of the top risks to their firm.
?I don?t think anyone expected domestic terrorism to be the number one risk. These responses demonstrate that the economy may be extremely sensitive to such an event. An attack could derail the economic engine,? said John Graham, professor of finance at Duke University and director of the survey.
The survey also shows that more than one-third of CFOs report wage increases are among the top risks their corporations face in the next 12 months. Across the sample, 95% of firms predict their wages will rise, with an average increase of about three percent.
Outsourcing of employment is expected to increase at about half of all firms, with the average number of outsourced employees increasing by nine per cent. Fifty per cent of CFOs say their firm will increase their dividend payments in the coming year, a significant increase from last quarter?s survey.
A third of CFOs cite price inflation as a top risk. Prices are expected to increase at 59% of firms in the next year, with price inflation averaging 2.1%.
All the results of this extensive survey, and more information can be found at https://www.fei.org/cfosurvey.cfm.
The FEI is the leading professional organization for CFOs and other senior financial executives. FEI’s CFO “Outlook Survey” is being conducted with Baruch College’s Zicklin School of Business.
