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CFOs Express More Optimism

CFOs Express More OptimismFinancial executives at U.S. companies expressed more optimism that their businesses will hire employees and see revenue growth in 2011, according to a recent Bank of America Merrill Lynch survey.

Of the 801 executives surveyed in the bank’s annual CFO Outlook, 47% said they expect their companies to hire additional employees next year. This is up from 28% who forecast hiring last year. Only 6% said they expect layoffs, compared with 9% last year. In addition, 64% of CFOs expect revenue growth in 2011, up from 61% last year.

“Despite the challenging economic climate, many CFOs have growing confidence that their companies have weathered the worst of the storm and are poised for expansion,” said Laura Whitley. She is a Global Commercial Products executive at Bank of America Merrill Lynch. In addition, she oversees the delivery of debt, treasury and liquidity solutions. Doing such supervision to more than 140,000 commercial and institutional clients. “Although concerns about the economy remain, the increase in CFOs who expect to hire employees could be crucial to improving the nation’s unemployment rate.”

Financial executives gave the current economy a score of 47 out of 100. Such a score is up slightly from last year’s score of 44. Last years score was the lowest in the 13-year history of the annual CFO Outlook. Despite that improvement, CFOs weren’t as optimistic about U.S. economic growth. Only 56% said they expect expansion in 2011. This differs to the 66% of CFOs who forecast economic growth a year ago.

Other notable findings in the survey:

  • When asked what will have the biggest impact on the economy in 2011, CFOs ranked healthcare reform No. 1 at 54%, followed by the budget deficit at 52% and the housing market at 43%.
  • Related to the above, CFOs’ top financial concern by far is health care costs. This is followed by revenue growth and cash flow. The top concern last year was revenue growth.
  • Only 27% of CFOs expect the cost of capital to increase, compared to last year when nearly half of CFOs expected a higher cost of capital.
  • Executives at manufacturing companies generally were less positive about their sector than CFOs at services and commodities companies, which include construction, retail, transportation, finance, education, healthcare, and food service businesses. Only 47% of manufacturing CFOs predicted expansion in their sector versus 58% of CFOs in other sectors. Conducted by Granite Research Consulting, the CFO Outlook helps Bank of America Merrill Lynch better understand how financial executives view the economy. The results were compiled from phone interviews of 801 CFOs, finance directors and other executives selected randomly from U.S. companies with annual revenues between $25 million and $2 billion. Interviews were from mid-September to late October. The margin of error is 4%.—————

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