CFOs optimistic about near-term US economic growth


As we have seen so often, just as consumer optimism takes a turn for the worse, the optimism level of the business community turns in the other direction. A survey of corporate CFOs find them in a better mood about the economy than at any time since the financial collapse of 2008.

The survey comes from TD Bank.

It notes that 46% of financial managers are optimistic about the prospects for economic growth in the US, and further, 57% are optimistic about the prospects of their own particular company.

It has been reported that many companies have been sitting on cash, and that fact was confirmed by the survey. Almost two-thirds of respondents said their company had accumulated at least a moderate stockpile of cash, and of that group, better than a quarter said they are ready to start spending it.

“Business executives have grown more willing to invest, albeit cautiousy, over the last year and our survey results support this trend continuing through 2013,” said Greg Braca, Head of Corporate & Specialty Banking at TD Bank. “Despite remaining policy and regulatory concerns at the macro level, CFOs seem poised to drive expansion and investment with capital accumulated since the downturn.”

Most CFOs are looking for increased cash flow, and 48% expect to increase capital expenditures over the next year.

What will benefit from increased spending? Here’s a list:
* 54%: Technology capex
* 34%: Facility improvements
*26 %: Hiring
* 24%: New facility construction
* 20%: Capex on office equipment
* 18%: Expansion via M&A

Significantly, the M&A percentage increases to 24% when the poll includes only companies with revenues of $500M or greater.

“The climb to a sustained corporate recovery has been a long one, but our survey results and recent work with customers indicate the environment is progressing,” said Fred Graziano , Head of Regional Commercial, Government and Small Business Banking, and U.S. Treasury Management Services, at TD Bank. “The cautious optimism hinted at in last year’s survey has begun to take hold within our footprint, and we’re seeing customers capitalize on the low interest rates through M&A and self-investment, positioning themselves for a recovery in the market.”

RBR-TVBR observation: It will be a very good thing for the economy as a whole if a significant number of companies stop sitting on cash and start spending it. Money spent on hiring creates consumers who spend. Money spent on capex, facility improvement and construction create demand for goods and services, which also leads to more hiring, and even more beneficial consumer spending.

This is the kind of executive sentiment which, if converted to solid action, ought to perk up consumer sentiment dramatically.