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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
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
“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 percent in 2011 and our pipeline of new business is up 16
percent 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 percent
again this year.”
Current Views on Health of Economy and Industry
CFOs’ sentiment on the current health of the U.S. economy grew stronger
after a significant dip during the third quarter of 2011. However, views
on the strength of the global economy fell again, as concerns rose about
CFOs expressed more positive sentiment than in last year’s third quarter
about their own industry. Food, beverage & agriculture CFOs were the
most positive, and healthcare companies had the least favorable views.
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.
Ninety-four percent expect the US economy to grow or be stable this
year, up 14 points, with 23 percent shifting to a growth outlook.
Eighty-seven percent anticipate their industry to grow or be stable
this year, even with 6 months ago, with 9 percent shifting to a growth
Ninety-one percent expect company revenues to grow or be stable this
year, with 67 percent seeing an increase, up 5 points.
Eighty-one percent expect company profits to grow or be stable in
2012, up 8 points.
Confidence Indicators: Cost Structure, Hiring and Capital Expenditures
The large majority of respondents (83 percent) said they plan to
maintain or increase their overall cost structure in 2012, up 1 point
from the last survey.
The hiring outlook also improved, with 74 percent of CFOs planning to
hire this year, a 6-point increase. The average projected workforce
increase in 2012 is 5 percent.
Seventy-six percent 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 percent), an increase
of six-points since the last survey, and 59 percent of CFOs believe
the cost of capital will remain the same throughout 2012.
Pricing Outlook – More than half (51 percent) of CFOs
expect to raise prices on their company’s products or services this
year, down from 59 percent a year ago.
Biggest Internal Challenges – Implementing service-process
improvements was the most commonly cited internal challenge for 2012
(55 percent). The need for talent and leadership development showed
the most increase since the last survey, up four points to 42 percent.
For additional survey data, including detailed industry-level findings,
contact Ned Reynolds at 203-229-5717. For an executive summary including
industry highlights, visit gecapital.com/cfosurvey.
GE Capital supports the middle market with more than just financing. In
2011, in partnership with the Fisher College of Business at The Ohio
State University (OSU), GE Capital founded the National Center for the
Middle Market (NCMM). The Center is the leading source of knowledge,
leadership, and innovative research on the U.S. middle market economy.
Through research, executive education, and student engagement, the NCMM
is dedicated to promoting job creation and growth in the middle market
as well as driving the dialogue on this vital economic segment. The NCMM
has produced foundational research on the size and contributions of the
U.S. middle market, and is funding and overseeing additional projects in
this area. For more information, visit middlemarketcenter.org
Among the CFO surveys published in the U.S., the GE Capital
Middle-Market CFO Survey is one of the few that examines businesses
across distinct sectors, providing a more comprehensive picture of how
financial executives view the world today and their outlook for the
months ahead. CFOs surveyed were from an independent Dun and Bradstreet
source of middle-market companies with revenue between $50 million and
$1 billion, and average revenue of $158 million with the exception of
the transportation industry respondents.
About GE Capital
GE Capital offers consumers and businesses around the globe an array of
financial products and services. For more information, visit gecapital.com
or follow company news via Twitter (@GECapital). GE (NYSE: GE) is an
advanced technology, services and finance company taking on the world’s
toughest challenges. For more information, visit ge.com.