Wednesday, October 7, 2009

CFOs and Treasurers Maintain Recessionary View

Posted by Mark Brousseau

Even as the U.S. economy has exhibited signs of stability in recent months, financial professionals have not seen solid evidence that business conditions have turned the corner.

The vast majority of attendees to the annual conference of the Association for Financial Professionals (AFP) believe the U.S. economy remains in a recession, despite indications of economic growth in the third quarter. Their uncertain outlook for near-term business conditions parallels expectations that their organizations will not resume hiring or capital spending, which they had halted over the past year, according to an on-site survey conducted yesterday.

Just 11 percent of responding conference attendees -- which include CFOs, treasurers and other treasury and finance executives representing companies of a median size of $1.5 billion in annual revenues -- believe that the U.S. economy is out of the recession. The outlook for the near-term is not much more optimistic. Just 20 percent of survey respondents believe the recession will end before of the year while 69 percent expect the recession will continue well into 2010.

"AFP members have played a critical role in maintaining the financial stability of their organizations through the recession," said Jim Kaitz, president and CEO of AFP. "As we look ahead, AFP will continue to work with policymakers to ensure that financial regulatory reform is balanced and represents the needs of financial professionals. We are confident that responsible regulation will foster stable and secure financial markets."

Asked whether their organizations would be apt to increase or decrease payrolls in the next six months, nearly two-thirds of financial professionals say they expect to maintain payrolls at current levels. Of those responding, 22 percent expect company payrolls to shrink further while just 14 percent anticipate that their organization will resume hiring over the next six months.

Similarly, the overwhelming majority of survey respondents expect to either maintain or further cut capital spending over the next six months. Just 21 percent of financial professionals anticipate their organization will increase capital spending in the coming months.

As employment and capital spending have stabilized, so has their companies' access to capital. More than half of respondents indicate that their organizations' access to capital stabilized over the past six months. Further, the area where capital access may have improved is among companies that have utilized the debt markets -- 31 percent of organizations have had improved access to debt markets over the past six months. Access to banking lending has improved for 22 percent of respondents while a similar percentage report improvements in raising capital in the equity markets.

When asked about the greatest risk to their organization's ability to prosper in 2010, financial professionals were most likely to identify one of two threats: failure of consumer demand to materialize (30 percent) and the possibility of a double dip recession (28 percent). Consistent with the reported stability in capital markets above, only 12 percent of survey respondents see a loss of access to capital as the greatest risk to their organization.

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