Financial executives at U.S. companies continue to be concerned about
the economy, with only two out of five executives expecting growth in
2013, according to the Bank of America Merrill Lynch 2013 CFO Outlook.
The 602 executives who participated in the 15th annual survey gave the
U.S. economy an average score of 49 out of 100, up from 44 in the 2012
report. CFOs gave the global economy a score of 45, up from 43 a year
Optimism about economic growth remained muted, with only 39 percent of
CFOs predicting expansion in 2013, compared with 38 percent last year.
Perhaps more telling, 24 percent of executives said they expect the
economy to contract this year, up significantly from 11 percent in 2012.
“It is clear that uncertainty continues to linger among CFOs, which is
understandable given the broader economic issues both in the U.S. and
overseas,” said Alastair Borthwick, head of Global Commercial Banking at
Bank of America Merrill Lynch. “Until they see solid evidence of
stability, CFOs will be guarded in their optimism and growth plans.
Expansion still is possible but may be limited in the short term to
certain industries and markets.”
Despite concerns about contraction, most CFOs expect their companies to
avoid layoffs in 2013. Only 8 percent predicted a reduction in
workforce, compared with 7 percent last year. Meanwhile, 48 percent said
they expect to maintain the current number of employees, while 45
percent said they expected to hire employees. Both responses are similar
to last year’s survey.
In Oregon, retailer Coastal Farm & Ranch is exploring the possibility of
adding to its 12 stores this year. If that expansion happens, the
company would need to hire more employees to meet increased customer
demand. “With more homeowners choosing to grow their own produce or
raise chickens and other animals for food, we’ve seen more interest in
our products and services,” said Buzz Wheeler, Coastal Farm & Ranch’s
chief executive. “Many people still may be worried about the overall
economy, but we’re optimistic this year will bring plenty of
One area of significant growth in the latest CFO Outlook was
international activity, with 73 percent of CFOs saying their companies
are involved in non-U.S. markets. That’s up from 54 percent in the
previous annual survey, and executives reported increased buying from
non-U.S. markets (62 percent vs. 47 percent last year), selling to
non-U.S. markets (55 percent vs. 34 percent) and operations in non-U.S.
markets (30 percent vs. 15 percent).
“Companies across the U.S. are doing more business around the world,
which adds another dimension to their financial needs,” Borthwick said.
“We’ve seen this expansion and diversification with many Bank of America
Merrill Lynch clients, who value their access to our expertise in
providing global solutions at the local level.”
Other notable findings in the 2013 CFO Outlook:
Among potential impacts on the U.S. economy, the effectiveness of U.S.
government was listed as a concern by 64 percent of executives. In
addition, 63 percent listed the U.S. budget deficit and 62 percent
listed healthcare costs.
The top financial concern for CFOs’ own companies was healthcare
costs, chosen by 58 percent. That was followed by revenue growth at 43
percent and cash flow and corporate tax rates, both at 34 percent.
Regarding revenues and profits, 56 percent of CFOs expect revenue
growth – same as last year – while 40 percent anticipate a growth in
profit margin, down slightly from 41 percent last year.
Only 17 percent of CFOs expect their companies’ borrowing needs to
increase in 2013, down from 28 percent in 2012, while 17 percent
expect those needs to decrease, up from 12 percent.
Regarding financing, 19 percent of executives expect the cost of
capital to increase, down from 21 percent last year.
M&A activity could pick up slightly, with 22 percent of CFOs saying
they expect to participate in a merger or acquisition in 2013, up from
18 percent a year ago.
CFOs increasingly expect labor costs to rise, with 72 percent
predicting higher costs per employee, compared with 58 percent last
The top reasons CFOs cited for not hiring additional employees in 2013
were insufficient customer demand (56 percent), uncertainties about
higher healthcare and insurance costs (32 percent), and worries about
the sustainability of the economic recovery (29 percent).
Now in its 15th year, the CFO Outlook is conducted by Granite
Research Consulting and helps Bank of America Merrill Lynch better
understand how financial executives view the economy. The results were
compiled from interviews of 602 CFOs, finance directors and other
executives selected randomly from U.S. companies with annual revenues
between $25 million and $2 billion.
Interviews were conducted from mid-November 2012 to mid-January 2013.
The margin of error is +/-4 percent. The full report will be available
Bank of America
Bank of America is one of the world's largest
financial institutions, serving individual consumers, small- and
middle-market businesses and large corporations with a full range of
banking, investing, asset management and other financial and risk
management products and services. The company provides unmatched
convenience in the United States, serving approximately 53 million
consumer and small business relationships with approximately 5,500
retail banking offices and approximately 16,300 ATMs and award-winning
online banking with 30 million active users. Bank of America is among
the world's leading wealth management companies and is a global leader
in corporate and investment banking and trading across a broad range of
asset classes, serving corporations, governments, institutions and
individuals around the world. Bank of America offers industry-leading
support to approximately 3 million small business owners through a suite
of innovative, easy-to-use online products and services. The company
serves clients through operations in more than 40 countries. Bank of
America Corporation stock (NYSE: BAC) is a component of the Dow Jones
Industrial Average and is listed on the New York Stock Exchange.
Visit the Bank of America newsroom for more Bank
of America news.