US Optimism Tempered by Fears over Europe

More than half of North American corporate treasurers and chief financial officers (CFOs) believe business conditions will improve in 2015, the largest percentage predicting improvement since 2005, according to a survey by the Association for Financial Professionals (AFP), parent of gtnews.

The latest AFP Business Outlook Survey, which has tracked business predictions of US and Canadian CFOs, corporate treasurers and other financial executives for the last 11 years, attracted responses from 856 US finance executives. It found that 44% expect the US economy to grow between 2.0% and 2.9%, while 31% are even more optimistic and expect it to grow between 3.0% and 3.9%.

Finance executives expect growth to occur in the second half of 2015, creating another 1.9m non-farm jobs in the US labour market. Among those surveyed, 49% say their companies anticipate hiring workers in 2015.

Among their other expectations for 2015:

  • The US economy will grow by a median of 2.7%, slightly faster than 2014.
  • Non-farm employment will expand by 1.9m jobs, with 49% of companies adding workers in the US.
  • Among companies with workers outside the US, 43% expect to add non-US jobs.
  • US consumer prices will rise by 1.6%, staying below the Federal Reserve’s two percent inflation target rate.
  • The US dollar will continue to appreciate against other major currencies.

“AFP members accurately predicted this year’s economic growth,” said Jim Kaitz, AFP’s president and chief executive officer (CEO). “We have been tracking cash accumulation, which slowed this year as companies began to invest in the future. Now the big news is that almost half of companies plan to expand payrolls in 2015.”

Clouds on the Horizon

Nevertheless, US finance executives see potential threats to economic growth, namely rising healthcare costs (51%), political gridlock in Washington (41%) and increased business competition (35%). They also see potential for increased corporate borrowing costs, with a median expected increase of 27 basis points in 2015. A full 40% of respondents expect their borrowing costs to rise by 100 basis points or more in the next two years.

Survey respondents also see threats arising from the economic slowdowns in Europe (28%), China (22%), and Asia outside of China (17%). From a foreign exchange standpoint, finance executives see a mixed impact from the expected strength of the US dollar, with 20% saying they expect the dollar to have a detrimental impact on earnings and 24% anticipating a positive impact.

The full report is available at www.AFPonline.org/outlook .

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