Despite anticipated record-setting consumer spending this season and research that indicates many small businesses are planning to hire next year, those controlling the corporate purse strings say the economy is worse this year than it was last year.
That's the finding of a new Bank of America/Merrill Lynch CFO Outlook, which found that CFOs now give the U.S. economy a score of 44 out of 100, down from 47 last year, which was the lowest in the survey's 14-year history. The survey polled 600 CFOs at companies with annual sales ranging from $20 million to $2 billion.
Many of the CFOs surveyed also think it's less likely that their companies will be more profitable in 2012 than 2011. A year ago, 55 percent expected to be more profitable in 2011, whereas today only 41 percent anticipate profit-margin growth and 15 percent predict declines in the year ahead.
CFOs also point squarely at the U.S. government as the cause of most of their troubles. Seventy percent of CFOs cited concern about the effectiveness of U.S. government leaders and 63 percent cited the U.S. budget deficit. Other concerns include healthcare costs (60 percent), unemployment levels (58 percent) and a lack of consumer confidence (55 percent). By contrast, last year's top concern regarding the economy was healthcare reform, chosen by 54 percent of CFOs.
Though they are concerned about the economy, the majority of CFOs said their companies plan to continue to invest in the growth of their businesses. Sixty percent of companies report 2012 R&D expenses to be comparable to pre-recession levels, 16 percent anticipate an increase, whereas 11 percent say R&D spending will be lower in 2012.
In addition, almost half (46 percent) of companies plan to hire new employeesin 2012. Another 48 percent of CFOs anticipate their employee levels will remain the same. Only 7 percent anticipate staff reductions.
One way companies plan to finance that hiring and research is by raising prices and borrowing money. Half of all companies surveyed intend to increase their prices in 2012 and 28 percent expect their borrowing needs to increase in 2012.