Top financial executives at U.S. companies are showing more economic optimism as they expect to spend more, increase hiring and plan for acquisitions in the next year.
But they also caution that there’s a 33 percent chance that the U.S. economy will slip back into recession in the next 12 months.
Those findings are part of the quarterly Duke and CFO Magazine Business Outlook survey.
The latest survey, concluded on March 8, marks the 68th consecutive quarter that the survey has been conducted. The query generated responses from 1,143 CFOs, including 506 from the United States, 256 from Asia, 177 from Europe, and 204 from Latin America.
Responses from surveyed U.S. CFOs boosted the U.S. Business Optimism Index this quarter to 55 on a scale from 0 to 100. That’s higher than last quarter’s reading of 51 but still below the long-run average optimism of 59. U.S. optimism scored higher than Europe’s reading of 53 but still trails optimism in Asia, at 62. Latin American CFOs are showing the most optimism of all, with a reading of 69, up from 66 last quarter.
Corporate spending is expected to rise. U.S. companies plan to increase their spending by 5.3 percent this year, double what executives projected last quarter. The spending will be split nearly evenly between replacing existing assets and adding new investments. Full-time domestic employment is expected to rise 2.2 percent in the next 12 months. And U.S. corporations plan to grow via acquisition.
“One-fourth of U.S. company acquisitions will involve the purchase of foreign assets,” said John Graham, a professor of finance at Duke’s Fuqua School of Business and director of the survey. “Foreign targets are primarily located in Europe and Asia.”
As executives look at corporate hiring and spending plans, they overwhelmingly expressed support for dramatic immigration reform that will open the doors to highly skilled workers and allow them to enter and stay in the country. More than 88 percent of surveyed U.S. CFOs say the United States should drop the current ‘lottery system’ and instead adopt a merit-based system to determine who can immigrate to the country.
“The collective opinion of corporate America is that the United States needs to become more welcoming to highly skilled and educated workers,” Kate O’Sullivan, editorial director at CFO Magazine said in a statement. ”Otherwise, the U.S. risks a train-then-drain scenario, in which skilled workers are educated in the United States but then leave due to the difficulty in finding permanent employment.
“During the recession and recent recovery, CFOs have consistently told us that they struggle to hire and retain qualified employees for certain high-skill tasks.”
More than 81 percent of surveyed CFOs believe the government should make it easy for foreign science and technology undergraduates studying in United States to obtain H1B work visas. Routine awarding of green cards to foreign graduate students pursuing advanced science and technology degrees earned the support of 78 percent of CFOs.
The survey showed that nearly 40 percent of U.S companies plan to make an acquisition in the next 12 months. Merger and acquisition activity is expected to be strong among manufacturing and finance firms.
Other survey findings of note:
- Top external concerns in Asia include price pressure from competitors, governmental policies, global financial stability and (except in Japan) inflation.
- On average Asian firms believe that real economic growth in their country will average 5 percent (1.5 percent in Japan; 6 percent in China). But if the United States falls into recession, Asian growth would fall to about 2 percent.
- More than 60 percent of Latin American CFOs say that weak economic growth in the U.S. and Europe is negatively affecting growth for their own firms. On average, Latin American firms believe that real economic growth in their country will average 4.1 percent — but if the U.S. were to experience a recession, Latin American growth would fall to 2.7 percent .
- Layoffs are expected to continue in Europe with 45 percent of companies planning to reduce full-time employment. Capital spending is expected to increase 1.5 percent and tech spending by 4.2 percent.