Nearly two-thirds of finance executives predict the U.S. economy will fare better this year than last year, according to a new survey.
The survey, by Adaptive Planning and the Business Performance Innovation Network, found that 64 percent of the finance executives they surveyed expect the overall economy in 2011 to improve over last year—an optimistic outlook reflected by reports of improving economic conditions, reduced fears of a “double-dip” recovery and lower levels of economic uncertainty.
The Q4 2010 Business Volatility and Variables Survey revealed that fears of a double-dip recovery are falling. Thirty-six percent predict a “W-shaped” recovery, down from last quarter’s 41 percent. In parallel, predictions for a “U-shaped” recovery have risen to 34 percent from 29 percent last quarter. The majority view current economic conditions to be the same (43 percent) or better (42 percent) than they were six months ago.
At the same time, 52 percent of financial executives believe economic conditions will improve over the next six months— the first optimistic majority recorded. Expectations have risen significantly from last quarter, when only 36 percent acknowledged optimism. At the same time, only 10 percent anticipate a worse economy in six months— a big drop from 20 percent last quarter.
However, unemployment remains the single greatest concern for the overall U.S. economy, with 64 percent citing it among the top challenges. The timing for a meaningful improvement in jobs growth continues to be pushed back. Most finance executives (59 percent) expect meaningful jobs growth will not occur until 2012 or beyond. This has risen since last quarter, when only 38 percent expected jobs growth to occur in 2012 or later.
Respondents from small companies are more cautious in their optimism than those from larger companies. While pessimism is low across companies of all sizes, only 43 percent from small companies expect conditions to improve over the next six months, compared to 55 percent from midsized or large companies.
Company-specific outlook for jobs growth, revenues and profit margins over the next six months mirrors the optimism seen in the predictions for the broader economy. Nearly double the number of respondents expects job growth at their own companies (31 percent) versus job losses (17 percent). Expectations for increased revenue have grown to 62 percent from only 49 percent last quarter, while expectations for increased profit margins has risen to 39 percent from 29 percent last quarter.
Of all respondents, finance executives from manufacturing industries were most bullish about the future for both the overall economy and their respective companies. A full 68 percent from this sector expect economic conditions to be better in six months, compared to 50 percent of non-manufacturing finance executives. Also in six months, 79 percent anticipate that their company will have higher revenues and 50 percent expect higher profit margins, compared to 60 percent and 38 percent from other respondents.
Overall, the economic outlook continues to be highly uncertain, with 42 percent of finance executives reporting high or very high levels of uncertainty. This uncertainty has dropped from 53 percent last quarter, yet continues to drive more frequent re-forecasting and scenario planning. Fifty-three percent expect to increase the frequency of their re-planning and what-if analysis next quarter.
The top concerns of finance executives for their own companies remain consistent with prior surveys. Demand for products and services, credit and financial market stability, and unemployment remain the top concerns for the next six months.
The online poll surveyed financial professionals from companies in over 20 industries and ranging in size from under $10 million to over $1 billion in revenues. This is the eighth quarterly poll examining perspectives on key economic conditions, individual company performance, and the role of planning and forecasting in the current economic downturn.