U.S. chief financial officers (CFOs) of middle-market companies have grown more positive about the state of their industries and businesses as well as the state of the domestic economy over the last six months, according to the latest middle-market CFO survey by GE Capital.
 
In terms of potential threats to the U.S. economy in 2012, concern over European fiscal conditions spiked in the first quarter, matching worries over the U.S. budget deficit and ahead of concern about U.S. unemployment levels. The two biggest threats cited to business performance over the next 12 months were healthcare and raw materials costs.

The survey, which took place during the first quarter of 2012, included responses from 495 CFOs of companies with an average revenue of $143 million operating across seven major industries, including: metals, mining and metals fabrication; food, beverage & agriculture; general manufacturing; healthcare; retail; technology & business services; and transportation.
 
“Mid-market CFOs are more optimistic than six months ago, despite the European fiscal crisis and inconsistent job growth,” said Dan Henson, president and CEO of GE Capital, Americas. “A larger majority sees top-line growth and stable or better profits this year, and more will be hiring. These companies have access to affordable capital, which in 2012 is most likely to be targeted for investment to finance growth and to purchase equipment.”
 
“This outlook is generally consistent with what we are seeing in our own, mid-market financing businesses, as our total financing activity was up 15% in 2011 and our pipeline of new business is up 16% at the end of the first quarter. We’re also seen consistent improvement over the last three years in the companies in our loan portfolio, with average customer EBITDA (pretax cash flow) up 10% again this year.”
 
2012 Growth and Profit Expectations

Looking forward, CFOs are more optimistic than six months ago about growth in the U.S. economy, in their own industry, and about the outlook for their own company.

• 94% expect the US economy to grow or be stable this year, up 14%, with 23% shifting to a growth outlook.
• 87% anticipate their industry to grow or be stable this year, even with 6 months ago, with 9% shifting to a growth outlook.
• 91% expect company revenues to grow or be stable this year, with 67% seeing an increase, up 5%.
• 81% percent expect company profits to grow or be stable in 2012, up 8%.

Confidence Indicators: Cost Structure, Hiring and Capital Expenditures

• The large majority of respondents (83%) said they plan to maintain or increase their overall cost structure in 2012, up 1% from the last survey.
• The hiring outlook also improved, with 74% of CFOs planning to hire this year, a 6-point increase. The average projected workforce increase in 2012 is 5%.
• 67% expect to grow or maintain total capital expenditure spending over the next 12 months, down four points from the last survey, with metals & mining and transportation companies the most likely to increase CAPEX spending.

Other Top Findings:

• Credit Availability/Cost – CFOs say credit availability has remained stable over the last 12 months (63%), an increase of six-points since the last survey, and 59% of CFOs believe the cost of capital will remain the same throughout 2012.
• Pricing Outlook – More than half (51%) of CFOs expect to raise prices on their company’s products or services this year, down from 59% a year ago.
• Biggest Internal Challenges – Implementing service-process improvements was the most commonly cited internal challenge for 2012 (55%). The need for talent and leadership development showed the most increase since the last survey, up four points to 42%.

To read the full GE Capital U.S. Mid-Market CFO Survey – Spring 2012, click here: