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Nearly half (47 percent) of the CFO respondents to a Grant Thorton survey released this week expect the U.S. economy to improve, with another 44 percent expecting economic conditions to remain steady. A mere 9 percent of CFOs expect the U.S. economy to decline.
According to the survey, that optimism is bolstered by improvements in a variety of common economic indicators, including:
- The U.S. gross domestic product rose 4.6 percent in the second quarter, and a seasonally adjusted 3.9 percent in the third quarter.
- Domestic demand increased 3.4 percent in the second quarter
- Consumer spending rose 2.5 percent in the second quarter, compared with 1.7 percent in Q1.
Industry Trends
Asked about their industry's prospects over the next six months, the highest degree of optimism was shown by respondents in the construction and private equity industries (both at 71 percent). Transportation and "other financial services" leaders expressed optimism at 61 and 60 percent, respectively.
Perhaps reflecting regulatory uncertainty and marketplace shifts, a third (32 percent) of health care respondents had an optimistic outlook for the next half-year.
Growth Strategies
The most common growth strategies CFOs plan to tackle in the upcoming year include pursuing organic growth in existing markets (87 percent) and introducing new products or services (72 percent).
Despite favorable trends in capital markets, respondents are planning to retain as much control as possible and showing an aversion to debt financing and IPOs. Less than a quarter of respondents (22 percent) said obtaining (non-IPO) equity financing was important for their growth, and just a fraction (5 percent) are looking to conduct an IPO.
The findings suggest many organizations have a significant amount of capital on hand, making for a strong balance sheet and driving organic growth.
M&A on the Radar
Asked about non-organic growth strategies, more than a third (37 percent) of CFOs say they're planning a merger or acquisition in the next 12 months.
M&A interest was strongest among manufacturing CFOs, with 41 percent say their plans include a merger or acquisition.
"There is a lot of money in the market that hasn’t been put to use, whether that’s from private equity firms or strong balance sheets of strategic buyers," said Jeff French, leader of Grant Thornton’s national consumer and industrial products, and manufacturing, practices. "And, companies want to sell when the industry is strong and values are rising. All of these factors make acquisition activity robust."
Investing in Talent
As the U.S. job market continues to improve, surveyed CFOs said they plan to increase headcount and investments in their staffs.
The vast majority of respondents expect their companies' employment levels to increase (45 percent) or stay the same (46 percent), with 9 percent saying they expect to trim staff.
Nearly 60 percent of the respondents said they expect to hire external talent, with respondents in single digits saying they plan to expand the use of contract workers (3 percent), nearshoring (2 percent) or international outsourcing (1 percent).
A majority of CFOs believe salaries (70 percent) and health benefit costs (53 percent) will increase in the coming year. "CFOs appear ready to accept — and can afford to provide — higher wages; otherwise, they would have chosen outsourcing as an option to lower costs," the study says.