Citing an improving business environment, CFOs at large companies are more optimistic toward the outlook for their companies — even as their expectations on revenue and earnings growth moderate — according to a new survey.
The Deloitte CFO Signals quarterly survey for the fourth quarter of 2010 found that 53 percent of the 92 CFOs surveyed at North America's largest companies are more optimistic than they were in the previous quarter. The CFOs expect an average 8 percent rise in capital spending over last year.
The survey also found that CFOs believe high unemployment levels are largely the result of structural shifts that are making it harder to find the highly-skilled staff they need.
"While large company CFOs are still concerned about conditions within their home markets, many appear to be seeing and acting on opportunities to strengthen their businesses for the long term — and spending some of the cash they have accumulated over the past few years," said Sanford Cockrell III, national managing partner of the CFO Program at Deloitte LLP. "The results of the congressional mid-term elections appear to be contributing to this rising optimism.”
Polling of more than 150 CFOs at Deloitte’s mid-November CFO conference showed that nearly 60 percent believed the midterm election results would have a positive impact on their industries, and only 7 percent expected a negative impact.
More than half of the CFOs surveyed are more optimistic about their company's prospects this quarter and only 21 percent are less optimistic, compared with 36 percent last quarter.
Year-over-year performance expectations declined this quarter. Expected future annual sales gains dropped from 11 percent on the entire last quarter to 6.5 percent this quarter, and projected earnings gains fell from 20 percent to 12 percent.
All the surveyed industries, excluding the public sector, project revenue and earnings growth. The average year over-year growth projections for companies across all industries are 6.5 percent for revenues (as compared to 11 percent the previous quarter) and 12 percent for earnings (as compared to 20 percent the previous quarter).
Domestic hiring expectations are essentially unchanged this quarter with an expected 1.8 percent year-over-year gain, which is modest compared to current unemployment levels. On the plus side, no industries are projecting decreases, and some are projecting significant increases. CFOs project an average 3.6 percent increase in offshore personnel and 2.8 percent in outsourced staffing.
More than 60 percent of CFOs believe structural shifts are at least somewhat responsible for high unemployment. Supporting this view, nearly half of all surveyed CFOs said that, despite high unemployment, they are finding it harder to find sufficiently skilled staff than they did five years ago—citing changed staffing needs and regular staffing profiles that are now harder to find. Only 20 percent report easier hiring.
Consistent with their view that economic growth will not fix unemployment, CFOs oppose further government spending. More than 90 percent of CFOs surveyed say Congress should not wait for a less fragile economy to begin addressing the deficit.
Health care policy is top-of-mind, with half of surveyed CFOs rating it a top lobbying focus. CFOs expect health care reform to substantially affect their resourcing and costs, with more than 90 percent expecting the benefit cost per employee to rise and half expecting the quality and/or breadth of the offered benefits to decline. Despite concerns about health care reform, 80 percent of the CFOs surveyed are not projecting major changes in their human resources strategies or approaches to employer-sponsored coverage.
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