Both American and European CFOs worry about the fate of the Eurozone and its currency. But U.S. financial executives are even more anxious than their counterparts across the Atlantic, according to a just-released survey conducted by Financial Executives International and Baruch College's Zicklin School of Business.
Its "CFO Quarterly Outlook" -- which tackles traditional, recurring business issues, but also looks beyond to examine feelings about major economic concerns of the moment --- in the latest edition considered CFO views on everything from oil prices to their thoughts about the U.S. presidential race.
Interestingly, CFOs believe that crude oil prices, which were US$99.58 a barrel between Jan. 30 and Feb. 9, when the survey was taken, will not change substantially in the next six months. The overwhelming majority (84 percent of U.S. CFOs and 87 percent of European CFOs) believe the price will stay around US$90- US$110.
Romney the Top Presidential Choice
Expressing their preferences in the 2012 presidential election, CFOs strongly preferred former Massachusetts Gov. Mitt Romney to the current president, and to potential Republican challenges remaining in the race at the time --- with a 48 percent pro-Romney vote, compared to President Obama's distant-second 13 percent, followed by former House Speaker Newt Gingrich's 12 percent.
CFOs were closer, though, on who they thought would actually be victorious, with President Obama expected to win by 45 percent, and Romney by 40 percent.
"With nine months remaining until the election, U.S. CFOs are most concerned about how the candidates will address the issues that play an essential role in the health of their companies," FEI president Marie Hollein said of the survey results on political matters. "Whether or not their preferred candidate is voted into office, CFOs are going to demand reforms that will bring much needed economic growth in the U.S. It will be critical for the Administration to take into careful consideration the concerns of U.S. businesses, and work together to find solutions."
Looking at current U.S. issues, CFOs were most eager to see tax reforms to revive American businesses. Asked the legislation they would like signed into law this year, 24 percent cited a renewal of President George W. Bush's individual tax rates. Next was a cut in the corporate tax rate to 25 percent (cited by 17 percent), and elimination of the employer mandates and fees associated with the Patient Protection and Affordable Care Act (15 percent).
Revenue Growth Is Top Challenge
When it comes to the future of the Eurozone crisis, though, there are particular worries among CFOs on both sides of the Atlantic about the impact that a possible demise of the euro currency might have on their revenues.
When asked to rate their Eurozone concern on a scale of one (not concerned) to five (very concerned), 93 percent of U.S. CFOs selected a "three or higher." In Europe, 77 percent of the finance chiefs responded at those levels.
According to the survey, which polled 238 corporate CFOs from the U.S. and 123 corporate CFOs from Italy and France, concerns about domestic economic growth in their areas topped the list of economic concerns across the board. Some 48 percent of CFOs in both the U.S. and Europe rated that their number one or number two economic worry, much as they did a year ago.
Also like a year ago, CFOs on both continents saw revenue growth as the top business challenge that CFOs are facing across both regions for the first half of the year (34 percent of U.S. CFOs; 27 percent of CFOs in Europe.) Expense control followed that (15 percent U.S; 18 percent in Europe), and then demand (14 percent U.S., 16 percent Europe) and competition (11 percent U.S.; 14 percent Europe.)
But CFOs today are sharply divided about the outlook for unemployment, and about other business indicators, with Europeans expecting unemployment rates to progressively increase in the next 12 months.
A Split on Jobless Forecasts
On average, European CFOs expect the unemployment rate to hover around 11 percent six months from now, and jump to nearly 12 percent within a year. U.S. CFOs expect the rate to decrease a year from, now to 8.1 percent.
The optimism index recorded for the fourth quarter of 2011 showed European CFOs becoming less optimistic -- with an index decrease to 57.6 from 61 in the third quarter --while their confidence in the global economy jumped five points, to 51.8, from its survey low in November 2011.
This quarter, according to the survey, CFOs in the U.S. see little change in overall optimism in these areas quarter over quarter, and their confidence for the global economy rose slightly to 46.1 (from 45.50 in Q3), as did their confidence in their own businesses (67.60 from 67.30 in Q3).
U.S. CFOs reported increased optimism about the U.S. economy in the 2011 fourth quarter, moving up six index points to 57.1, from 51.10 in Q3.
Similarly, CFOs in the U.S. continue to forecast somewhat better results for their own businesses than do their European counterparts, with Americans seeing double-digit increases in the areas of capital spending and net earnings (both 13 percent) over the next 12 months. And in the U.S., technology spending is expected to rise 9.1 percent and revenue is expected to increase 8.2 percent. European CFOs on average expect more modest increases in these areas.
"The confidence among U.S. and European CFOs this quarter is little changed from the prior quarter," said John Elliott, dean of Baruch's Zicklin School. "U.S. CEOs have noticeably higher growth expectations around their businesses than do their European counterparts."
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