GLASTONBURY, Conn. – Though U.S. manufacturers are cautious about the business and economic outlook, 70 percent expect their own revenue to increase in the year ahead and 45 percent expect their profit margins to widen, Bank of America Business Capital found its “2008 CFO Outlook” survey.
“In this year’s survey, manufacturing CFOs see a strong economy today, but are cautious as they look ahead to 2008,” BABC president Joyce White said in introducing the report. “Less than half of the CFOs surveyed predict the U.S. economy will expand next year and less than one-quarter believe it will outperform the world economy. However, a majority of CFOs believe the actions taken by the Federal Reserve Board over the past year have helped the economy, and that there will be further rate cuts in 2008.”
Nationwide, the chief financial officers surveyed gave the current state of the U.S. economy an average score of 64 points – down from 67 last year – on a scale from 0 (very weak) to 100 (very strong) with 50 as the neutral value. Ratings better than 50 points were assigned by 74 percent of manufacturing CFOs nationwide and 72 percent in the Northeast, the region with the least rosy view of the economy today.
Looking ahead to 2008, only 44 percent of manufacturing CFOs nationwide expect the U.S. economy to expand next year, the least optimistic rating since 2002. But CFOs in the Northeast were more optimistic than their peers nationwide, with 47 percent expecting the U.S. economy to expand in 2008.
Forty-eight percent said the U.S. will underperform the global economy in 2008, while only 22 percent thought the U.S. economy would outperform the world economy, a reversal of the results last year, when more CFOs were optimistic (39 percent) than pessimistic (35 percent) about the nation’s performance. Optimism about 2008 was rarest among CFOs in the Midwest (19 percent) and Northeast (17 percent).
The manufacturing sector’s current state drew an average rating of 59 nationwide for the third consecutive year. Thirty percent of manufacturing CFOs nationwide expect the sector to expand next year – the same percentage as expect it to contract, but still an improvement from last year, when 26 percent expected manufacturing to expand and 35 percent expected a contraction. (READ MORE)
“A majority of CFOs continue to express concern primarily about the cost of energy, raw materials and health care, with 80 percent saying that the rise in energy costs will impact their product pricing in 2008,” White noted. “However, the sales and profit outlook continues to be positive and all indications are that corporate balance sheets are healthy.
“Despite the challenges ahead, manufacturers see opportunities for growth, with nearly three quarters of CFOs surveyed planning to either increase or maintain their current level of capital expenditures. They are also continuing to establish foreign operations and more CFOs plan to sell to foreign markets.
“It is clear that CFOs remain hopeful for the U.S. economy and the manufacturing sector. Indeed, many manufacturers are taking the steps necessary to succeed in an increasingly competitive and global economy.”
The 42-page report – from the company’s annual survey of chief financial officers at 600 mid-sized and large manufacturing companies nationwide, conducted this August through October – has a margin of error of plus or minus 4 percent.
Bank of America Business Capital – a provider of senior secured loans, cash management services, interest-rate and foreign-exchange risk-management and a wide range of capital markets products to companies around the world – is a division of Bank of America (NYSE: BAC). Additional information, including the full results of the “2008 CFO Outlook: A Survey of Manufacturing Company CFOs,” is available at www.bofa.com/businesscapitalnews.
