US finance professionals remain cautious in their economic outlook, believing the US economy will grow at modest pace of 1.7% in the coming year, creating an additional 1.3 million jobs, according to a business outlook survey released by the Association for Financial Professionals (AFP).
The ‘AFP Business Outlook Survey’, which has tracked business predictions of chief financial officers (CFOs), corporate treasurers and other financial executives for the last nine years, found that nearly half of survey respondents (46%) anticipate improved business conditions in 2013, with much of this growth occurring in the second half of the year. However, they temper their prediction with a caveat: Growth is in jeopardy if US budget issues cannot be resolved quickly.
Respondents indicated that Congress and the White House must act immediately to resolve long-term budget deficits, with over 60% believing the solution must be a combination of spending cuts and increased tax revenues.
The threat of a so-called US ‘fiscal cliff’ is already affecting some organisations’ decisions on hiring and capital investments. Any agreement that defers decisions on fiscal issues would not be acceptable to corporate financial executives. Almost two-thirds of organisations say Washington’s inability to reach consensus on a number of issues of economic importance makes them at least somewhat more hesitant to make investments for growth.
“Many companies are poised on the brink of growth,” said Jim Kaitz, AFP’s president and chief executive officer (CEO), “but political theatre is having a crippling effect on corporate spending and hiring, even corporate decision-making.”
In order to improve business conditions and stimulate hiring and investment, respondents believe Washington must agree on a long-term plan to reduce the federal budget deficit. While a majority believes this should be done with a blended approach, 35% believe the deficit should be reduced primarily or exclusively with spending cuts, while only 4% of respondents emphasized tax revenue increases as the solution to reducing the deficit.
Other actions that could trigger increased corporate growth include reforming corporate taxes and addressing
the regulatory burden on corporations, survey respondents said.
A plurality of companies expects to expand payrolls next year, both within and outside the US. Forty-two percent of organisations will expand employment in the US during 2013. Among companies that have employees outside the US, 41% plan to expand further internationally.
The survey was conducted between 26 November and 7 December and generated over 1,300 responses from corporate practitioners holding a variety of positions. The typical respondent is employed by an organization with annual revenues of US$1.5bn.
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