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CFOs Show Growing Confidence in U.S. Economy

During the past year, chief financial officers (CFOs) have grown significantly more confident in the U.S. economy, according to the 2013 Spring CFO Survey from Grant Thornton LLP. The survey findings reveal that 45 percent of respondents believe the state of the U.S. economy will improve during the next six months, compared to just 31 percent in the fall and 25 percent last summer.

That confidence extends throughout the survey findings, with 44 percent of those surveyed predicting that industry financial prospects will improve during the next six months, compared to 34 percent in the fall. Since last summer, the number of CFOs who believe the pricing or fees charged by their industry will increase in the next six months has jumped seven percentage points to 37 percent. In addition, when CFOs were asked about employment opportunities during the next six months, more than a third (40 percent) said their company’s head count would increase, rising 6 percent from the fall.

“The results of our spring survey are encouraging — particularly with respect to the uptick in expectations for improved financial prospects,” said Stephen Chipman, chief executive officer of Grant Thornton LLP. “Seemingly, steady improvements in key economic indicators, including labor and housing, have helped stimulate greater optimism among CFOs, at least in the near-term.”

According to the survey findings, almost two-thirds of CFOs (65 percent) expect the average cost of an employee’s salary to increase during the next 12 months, up from 59 percent in the fall. The total cost of employee benefits, including bonuses (56 percent), stock options (72 percent), 401(k) match (86 percent), and other company-matched retirement contributions (81 percent), are expected to remain unchanged from the year prior.

These findings come on the heels of similar data from the Grant Thornton International Business Report, which found that optimism in the performance of the nation’s economy among U.S. business leaders rose from -4 percent in fourth quarter 2012 to 31 percent in first quarter 2013.

While increased optimism among CFOs was prevalent throughout the survey results, they still cite legislative bottlenecks as an area of concern. Almost half of all CFOs surveyed (47 percent) say they are unable to make a major decision that would allow their company to grow because of uncertainty surrounding the funding of the U.S. government. Thirty-one percent of respondents ranked tax reform as the second greatest bottleneck.

economy

U.S. Business Leaders Showing Signs of Optimism

On the heels of a pessimistic outlook during the fourth quarter of 2012, US business leaders show signs of increased optimism in the performance of the nation’s economy according to the latest data from the Grant Thornton International Business Report, a survey of 3,200 business leaders in 44 countries. In first quarter 2013, optimism among U.S. business leaders rose from -4 percent to 31 percent.

This finding accompanies IBR data that reveals an improvement in sentiment about most areas of business performance and stability. The net percent balance of US business leaders expecting revenues to increase in 2013 rose by eight percentage points from the fourth quarter. In addition, profitability expectations rose sharply in first quarter 2013, up 14 percentage points from the previous quarter. Encouragingly, hiring expectations in the United States remain above the global average. A net balance of 29 percent of business leaders in the United States foresee an increase in hiring during the coming year, a four-percentage point increase from the previous quarter and five percentage points above the global average.

“With the fiscal cliff and presidential election behind us, the anxiety has seemingly lessened among business executives,” said Stephen Chipman, chief executive officer of Grant Thornton LLP. “While uncertainty is still present, it’s encouraging to see such a large increase in optimism among the nation’s business leaders—particularly when it comes to employment, which is key to US economic health.”

The increase in optimism in the US economy is on par with what is occurring in other markets, with global business optimism up to its highest level since early 2011. Globally, a net balance of 27 percent of businesses are optimistic about the economic outlook, up from just 4 percent from the previous quarter. Following the United States, the next two largest economies in the world also saw sentiment improve. China business optimism rose from a net balance of 19 percent to 29 percent while Japan saw a major increase in optimism, from a net balance of -70 percent to -2 percent.

Still, there are some areas for improvement. Despite a modest uptick from the previous quarter, few U.S. businesses plan to invest in research and development in 2013, with a net balance of only 12 percent expecting an increase during the next 12 months. In addition, 36 percent of U.S. business leaders cite regulations and red tape as the number one factor stopping them from growing their operations in the next 12 months.

Small Businesses getting help in down economy

U.S. Business Leaders Show Declining Optimism about Economy

U.S. business leaders continue to show a lack of optimism about the performance of the nation’s economy, according to the latest data from the Grant Thornton International Business Report, a survey of 3,200 business leaders in 44 countries. In fourth quarter 2012, optimism among US business leaders fell to -4 percent, the lowest since the depths of the financial crisis.

This finding accompanies a general lack of optimism about most areas of business performance and stability. For example, the net percent balance of US business leaders expecting revenues to increase in 2013 decreased by 10 percentage points from the third quarter. In addition, profitability expectations dropped by nine percentage point from the third quarter. As far as employment, arguably the country’s biggest concern, only a net balance of 25 percent of business leaders in the United States foresee an increase in hiring during the coming year, a three percentage point decrease from the previous quarter.

“The lack of confidence in, and optimism about, our economy among the nation’s business leaders shouldn’t be a surprise to anyone, given the ongoing fragile recovery and recent drama surrounding the fiscal cliff,” said Stephen Chipman, chief executive officer of Grant Thornton LLP. “During the next few months, our country’s political leaders should focus on resolving uncertainty so that business leaders, in this country and beyond, can gain the confidence in our economy that is crucial to US business competitiveness and the dynamic growth that comes with it.”

The notion that the recent debate about the fiscal cliff is affecting optimism about the economy correlates with other recent research from Grant Thornton US, which suggests 40 percent of CFOs have delayed decision making because of similar concerns.1

And though 39 percent of respondents believe there will be increased access to financing in the next 12 months, which often helps grow a business, 48 percent don’t expect to see any change. Slightly encouraging is that 74 percent of business owners plan to give employees raises in the next 12 months, though only 12 percent plan to give raises above the rate of inflation.

Interestingly, the lack of optimism in the US economy is actually quite different than what is occurring in other global markets. For example, business optimism in the emerging markets of Latin America remained relatively stable in the past year, and actually increased to 69 percent in the fourth quarter, up from 61 percent during the same period last year. The BRIC economies (34 percent to 39 percent) also remained consistently optimistic, and there has also been an increase in Asia Pacific (excl. Japan) (23 percent to 28 percent) during the same period.

By comparison, optimism in North America has been on a bit of a rollercoaster during the past year—going from 6 percent in the fourth quarter 2011 to 52 percent in the second quarter 2012, before falling to just 1 percent in the fourth quarter 2012. The G7 economies have seen similar fluctuations, while European businesses have reported a slow decline in business optimism.

“With such lack of optimism in our economy, many business owners may decide to postpone any major investments related to the future of their business, but this could be a mistake,” said Chipman. “In a market such as this, there are opportunities for certain businesses that have the foresight to concentrate on long-term growth opportunities by investing in the right people and infrastructure. Those businesses will be best positioned for success once sustained economic recovery is finally a reality.”