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CFO survey shows optimism on the economy

U.S. chief financial officers 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 during 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 about European fiscal conditions spiked in the first quarter, matching worries about the U.S. budget deficit and ahead of concern about U.S. unemployment levels.

The two biggest threats cited to business performance during the next 12 months were health care and raw materials costs.

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: metals, mining and metals fabrication; food, beverage and agriculture; general manufacturing; health care; retail; technology and business services; and transportation.

“Mid-market CFOs are more optimistic than six months ago despite the European fiscal crisis and inconsistent job growth,” GE Capital Americas president and CEO Dan Henson said in a statement. “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 purchase equipment.”

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 of the strength of the global economy fell again, as concerns rose about Europe.

Looking forward, CFOs are more optimistic than they were six months ago about growth in the U.S. economy, in their own industry and about the outlook for their own company.

Results show:

• Ninety-four percent expect the U.S. economy to grow or be stable this year, up 14 points, with 23 percent shifting to a growth outlook.

• Eighty-seven percent anticipate that their industry will grow or be stable this year — even with six months ago — and 9 percent have shifted to a growth outlook.

• Ninety-one percent expect company revenue 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.

Other top findings:

• Credit availability/cost: CFOs say credit availability has remained stable during the past 12 months (63 percent), an increase of six points since the last survey, and 59 percent of CFOs believe that 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 earlier.

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