Optimism About the Economy Improves Among US CFOs, Finds BofA Merrill Survey

US financial executives are much more optimistic about the national economy than they were last fall, with nearly two-thirds expecting it to grow in 2012, but they remain cautious about the global economy, according to the Bank of America Merrill Lynch (BofA Merrill) Chief Financial Officer (CFO) Outlook survey.

Of 251 executives surveyed recently, 63% said they expected the US economy to expand this year, up significantly from 38% in the previous survey conducted in fall 2011. Only 4% expects the economy to decline, down from 11%. CFOs gave the current economy a score of 53 out of 100, up from 44 in the previous report. The global economy received a score of 47, up slightly from 43.

CFOs’ optimism extended to hiring, with 51% expecting their companies to add employees in 2012, up from 46%. Executives also increasingly forecast higher revenues and profits this year, according to the survey.

“Although challenges remain, CFOs clearly feel better about the economy and opportunities for growth in 2012 than they did in late 2011,” said Laura Whitley, head of global commercial banking at BofA Merrill. “With more executives expecting increases in revenues, profits and personnel, it’s not surprising that optimism about the US economy as a whole is improving.”

As for barriers to business growth, government involvement was the most popular response, chosen by 37% of CFOs, followed by weak customer demand, domestic competition and operating costs. When executives were asked how the US government can encourage domestic business growth, the top response was simplify laws and regulations, chosen by 56% of CFOs, followed by change corporate tax policy, reduce the budget deficit, and offer tax credits or incentives.

Other notable in the survey include:

• Regarding revenues, 64% of CFOs expect revenues to increase this year, up from 56% last fall. In addition, 50% of CFOs expect profits to grow, up from 41%.
• The biggest potential impact on the economy is oil prices, chosen by 65% of CFOs – up from 40% last fall. In addition, 63% listed the effectiveness of US government leaders as a top concern, 54% listed the US budget deficit and 51% listed healthcare costs.
• The top financial concerns for executives’ own companies were energy costs and healthcare costs, both chosen by 51% of CFOs. Energy costs were up from 43% in the previous survey, while healthcare costs were down from 56%.
• Cash flow, consumer confidence, credit availability and US unemployment levels all have declined significantly as concerns from the previous survey.

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