CFOs see their own companies’ prospects for the coming year as mostly bright, despite predicting a tepid performance for the economy as a whole.
The hand-wringing over the U.S. economy by the Bush administration and media forecasts of continuing economic slowdown appear to have eroded the confidence of corporate America’s chief financial officers. Paradoxically, they are very optimistic about the prospects for their own companies, this month’s CFO Forum shows.
A majority of finance chiefs (53.7 percent) see the economy turning in just an average performance in 2001. About one third view the prospects for the economy as below average for the same period. That compares with only 12.2 percent with a positive view, and not one respondent who judges the outlook as very positive.
But when asked about the prospects for their own companies this year, CFOs paint a far more positive picture. The majority (51.8 percent) believe the outlook is either very positive or positive, while only 32.1 percent respond average, and 16 percent respond either below average or negative. Nearly two thirds of CFOs expect revenue growth to increase in 2001 over 2000; more than two thirds expect an increase in profits.
Despite their middling-to-poor forecast for the economy as a whole, an overwhelming majority (96.3 percent) of CFOs believe inflation will remain at or below 2 percent during the next year, while 85.3 percent see GDP growing by at least 2 percent in real terms.
Although 77.8 percent of CFOs report having increased wages and salaries during the past six months, only 52.6 percent expect to raise prices during the next six months. Of the 57 percent who have measured productivity gains during the past half year, 30.2 percent have seen gains of 5 percent or more; an additional 55.8 percent report productivity gains of between 2 and 4 percent.
What is the outlook for your company’s business during the coming year?
Very positive 7.4%
Positive 44.4
Average 32.1
Below average 11.1
Negative 4.9
What are your expectations for revenue growth in 2001 compared to 2000?
Increase 64.6%
Remain about the same 24.4
Decrease 11.0
If you expect an increase in revenue growth, by how much?
Less than 5 percent 23.3%
5 to 10 percent 53.3
11 to 25 percent 18.3
26 to 50 percent 3.3
51 to 75 percent 1.7
76 percent or greater 0.0
What are your expectations for profit growth in 2001?
Increase 67.1%
Remain about the same 23.2
Decrease 9.8
If you expect an increase in profit growth, by how much?
Less than 5 percent 5.3%
5 to 10 percent 43.9
11 to 25 percent 35.1
26 to 50 percent 10.5
51 to 75 percent 3.5
76 percent or greater 1.8
How do you view the prospects for the U.S. economy in 2001?
Very positive 0.0%
Positive 12.2
Average 53.7
Below average 32.9%
Poor 1.2
What are your expectations for inflation over the next year?
Less than 0 percent (deflation) 0.0%
Less than 1 percent but greater than 0 percent 6.1
1 percent 39.0
2 percent 51.2
3 percent 3.7
4 percent 0.0
At least 5 percent 0.0
What are your expectations for U.S. GDP growth during the coming year?
Less than 1 percent 4.9%
1 percent 9.8
2 percent 56.1
3 percent 26.8
4 percent 2.4
At least 5 percent 0.0
Has your company increased wages and salaries in the past six months?
Yes 77.8%
No 22.2
If so, by how much?
Less than 1 percent 0.0%
1 percent 0.0
2 percent 4.9
3 percent 44.3
4 percent 44.3
At least 5 percent 6.6
If you have not increased wages and salaries, do you plan to in the next six months?
Yes 79.2%
No 20.8
If so, by how much?
Less than 1 percent 0.0%
1 percent 0.0
2 percent 20.0
3 percent 45.0
4 percent 35.0
At least 5 percent 0.0
Does your company expect to raise prices in the next six months?
Yes 52.6%
No 47.4
If so, by how much?
Less than 1 percent 7.3%
1 percent 12.2
2 percent 26.8
3 percent 24.4
4 percent 14.6
At least 5 percent 14.6
Has your company measured productivity gains in the past six months?
Yes 57.0%
No 43.0
If so, by how much has productivity risen?
Less than 1 percent 7.0%
1 percent 7.0
2 percent 18.6
3 percent 27.9
4 percent 9.3
At least 5 percent 30.2
The results of CFO Forum are based on quarterly surveys of a universe of 1,600 chief financial officers. Because of rounding, responses may not total 100 percent.
