For the first time in the last few years, the Duke/CFO Magazine Global Business Outlook Survey projects good tidings for the United States economy in the coming months.
The quarterly survey, sent to about 1,400 chief financial officers globally, showed that U.S. companies’ financial heads expect strong earnings growth of 12 to 14 percent, as well as a 9 percent increase in capital spending for the next 12 months. Employment levels, however, are predicted to remain relatively steady, with projected full-time employment levels increasing only 0.2 percent in 2010.
“I think the economy is improving, and the capital spending results are indicative of that, but when people are out of work it kind of puts a lid on how fast economic improvement can be,” said John Graham, survey director and D. Richard Mead, Jr. Family professor of finance at the Fuqua School of Business. “The employment numbers are not bad news, but I wouldn’t call it good news either.”
The survey—which Duke played a key role in founding—has been running for 56 quarters. CFO Magazine Senior Editor Kate O’Sullivan said the survey has been accurate in predicting the current economic direction.
Graham said the results from this quarter’s survey, which were released March 3, were the most encouraging since the economic downturn began.
“We’ve been doing this survey for 13 to 14 years, and for the first 10 we heard good news all the time, and I started thinking ‘Gee, are CFOs all optimistic?’” Graham said. “But lo and behold, the last few years they’ve been incredibly pessimistic. This quarter again, it’s the most optimistic survey we’ve had in at least three years, and that’s really good news.”
O’Sullivan said she was pleasantly surprised by the double digit projected earnings growth percentage, but added that it may be skewed by the recession. The strong increase comes after several years of weak growth and it is easy to come up with a high number from such a low base, she said.
“Things really fell off a cliff over the last couple years,” she said. “They’re coming back, but slowly and not in a straight line.”
The survey also showed that Asia’s CFOs are much more optimistic about future growth, whereas Europe is lagging behind, projecting a flat capital spending budget and decreases in employment of up to 4.7 percent for part-time workers.
O’Sullivan said Europe’s dismal spending and employment numbers are significant, especially because reducing labor in Europe is much more difficult than in the U.S., where labor laws are not as strict.
Asia is expected to post 5 percent increases in employment, and 10 percent increases in capital earning and spending.
In the survey, approximately one-fourth of American companies said they were planning to expand overseas over the next two years, and China and India—not surprisingly—were their two top destinations, O’Sullivan said.
Graham said Duke’s expansion into Asia will be a boon to the school in coming years.
“It’s a great place for the University and exactly where you want to be, in a high growth area,” he said.
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