CFOs Optimistic About Economic Growth In 2013 – BoA Outlook Survey

Natasha Taghavi

24 July 2013

US financial officers have given the economy its highest score in five years, and were significantly more confident about economic growth in 2013, according to the 2013 CFO Outlook.

The 250 executives questioned in Merrill’s mid-year CFO update gave the US economy an average score of 58 out of 100, up from 49 in the previous survey conducted in late 2012. CFOs gave the global economy a score of 51, up from 45.

The survey revealed that CFOs voiced even stronger optimism about economic growth, with 55 per cent expecting expansion in 2013, compared with 39 per cent in the previous survey. Only 10 per cent said they expect the economy to shrink, down from 24 per cent.

This confidence, BoA said, comes as US companies continue to do more business in other countries, with 76 per cent of CFOs reporting some type of activity in foreign markets. That is up from 73 per cent in the previous survey and 67 per cent a year ago, as more companies are buying from, selling to, and establishing operations in non-US markets.

“Beyond their brighter view of the economy, CFOs and their companies remain focused on new markets and opportunities for international growth. While expanding into other countries is attractive, doing business globally brings many challenges and often requires a wide range of financial solutions. More than ever, US companies are seeking help with accessing capital, managing risk, maximizing cash and increasing efficiency as they grow their businesses,” said Alastair Borthwick, head of global commercial banking at BoA Merrill Lynch.

Other notable findings include:

Forty-eight per cent of CFOs expect their companies to hire employees this year, up from 45 per cent in the previous survey.

Regarding revenues and profits, 56 per cent of CFOs expect revenue growth – same as in the previous survey – while 43 per cent anticipate a growth in profit margin, up from 40 per cent.

CFOs gave the manufacturing sector a score of 57 out of 100, up from 53 in the previous survey - the highest mark since 2011. This was the seventh consecutive survey in which the sector received a score above 50.

When asked about foreign markets, 84 per cent of CFOs said their companies have operations in Canada or Mexico; 72 per cent said Asia Pacific; 66 per cent said Europe, the Middle East or Africa; and 25 per cent said Latin America.

Regarding expansion plans, 37 per cent of CFOs named Asia Pacific; 27 per cent said Canada or Mexico; 15 per cent said Europe, the Middle East or Africa; and 9 per cent said Latin America.

CFOs don’t expect a decline in sales to foreign markets, with 94 per cent saying they expect sales to stay the same or increase, up from 91 per cent in the previous survey.

Among the challenges facing companies as they grow globally, the most common were having local, on-the-ground expertise – listed by 19 per cent of CFOs – followed by risk management, a country’s economic stability and local/international laws, each at 18 per cent.

To offset costs related to the ACA, the top actions listed by CFOs were increasing healthcare costs per employee, cutting spending elsewhere in their businesses, implementing preventative healthcare programs and raising prices on products and services.

The 2013 CFO Outlook mid-year update was conducted by Granite Research Consulting .