Finance: Hope Against Hope: Manufacturing CFOs are Split on the State of the Economy

Finance: Hope Against Hope: Manufacturing CFOs are Split on the State of the Economy

Confidence looks a lot like wishful thinking when it comes to economic recovery.

It may not be much, but at least it's something: The number of optimistic CFOs now outnumber the pessimists (though just barely), at least when it comes to the state of the U.S. economy. In a recent survey by audit and tax firm Grant Thornton, 51% of the 1,000 CFOs polled say they believe the economy will improve over the next six months; conversely, 49% think it will either remain the same or get worse. So while at first glance it looks like CFOs are pretty evenly split on where the economy is headed, in fact this is the first time in eight years that the optimists represented the majority in Grant Thornton's survey.

Recent improvements in key economic indicators seem to signal that "the slow increase in confidence in the U.S. economy might be back on track," says Stephen Chipman, CEO of Grant Thornton. "However, in order for businesses to feel confident in long-term growth, hiring and investment, our country's leaders must pave a path to progress and a sustained economic recovery by ensuring stability in fiscal, public and tax policies."

Tellingly, manufacturing CFOs were more optimistic than their peers, with 56% expecting a better economy in the months to come. Also, 44% of manufacturing CFOs believe their companies will be able to increase their prices over the next six months (compared to 41% of CFOs as a whole). Meanwhile, the expectation is that energy costs will rise (54% believe so), along with raw materials costs (58%).

Nearly half (46%) of survey respondents also expect that headcount will increase over the next year, and 68% believe average salary levels will increase over the same period.

In a separate survey, conducted by audit and tax firm Deloitte, optimism among CFOs at large North American companies seems to be waning, particularly in the manufacturing sector. Thirty-nine percent of manufacturing CFOs polled report declining optimism when asked about their company's near-term prospects, which was more than twice the level for CFOs overall. Expectations for earnings growth dropped from 12.9% in the previous Deloitte survey to 7.7%. Sales expectations remained flat.

Survey respondents indicated that government policies and regulations are seen as substantial barriers to growth for their companies and industries. Meanwhile, the majority of CFOs (58%) report that cost control is the top priority for their CEOs, followed by managing performance and growing revenue.

"CFOs' sentiment and expectations over the last year have been less volatile. This is encouraging, but we have yet to see an acceleration in key survey metrics," says Greg Dickinson, a director with Deloitte. "Weaker sentiment this quarter among U.S. and manufacturing CFOs suggests we may be waiting a while longer to see it."



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