Confidence on shakier ground in the business world

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Nobody likes uncertainty, but that goes double for anybody running a business – and perhaps triple for those operating trucks, no matter the size, shape, or type of work that rolling iron performs.

It’s bad enough when the overall economy remains sluggish at best, with ever-gloomier portents coming from Europe and other fiscally distressed markets. Then add in the uncertainty over the approaching “fiscal cliff” here in the U.S., along with accompanying debates about tax increases, reforming, boosting the U.S. debt ceiling, and – of course – the now ever-present specter of more government regulation, and you’ve got a witches brew of stuff no business wants to touch.

That’s why the results of several recent surveys of chief executives – from big companies on down to small businesses – are starting to generate a lot of worry in many corners, especially in trucking. Because if businesses hold back on investment in infrastructure, push off factory upgrades, delay hiring, and in general try to hoard capital, freight volumes will no doubt get pinched – and in a big way.

For starters, take a look at the Business Roundtable’s (BRT) third quarter CEO Economic Outlook Survey, which details a further downturn in CEO expectations for sales, capital spending and hiring for the next six months. The BRT said its “business confidence” Index decreased to 66 in the third quarter this year; a whopping drop from 89.1 in the second quarter, the lowest reading since the third quarter of 2009, AND the third largest single quarter drop in the survey’s history.

“CEOs foresee slower overall economic growth for 2012 and have lower expectations for sales, capital expenditures and hiring compared to last quarter,” said Jim McNerney (at left), chairman of the BRT and chairman, president and CEO of The Boeing Company. “The downshift in quarterly sentiment reflects continuing concern about the strength of the recovery, including uncertainty over the approaching fiscal cliff and accompanying debates about the tax code, sequestration and the debt ceiling.”

Other key findings from BRT’s third quarter survey include: a 17% quarter-to-quarter drop in confidence regarding sales over the next six months; a 13% decline in plans for capital spending over the next six months; and a 7% reduction in hiring plans in the near term.

The chief financial officers (CFOs) polled in the Bank of America Merrill Lynch's seasonal outlook survey also ratcheted back their confidence in U.S. economic growth.

Only 36% of financial executives surveyed in the CFO Outlook Fall Update said they expect the economy to expand in 2012, down from 63% in the poll the firm conducted in the spring. At the same time, 13% said they expected the economy to contract, compared to 4% in the previous survey.

Conducted by Granite Research Consulting, the updates are compiled from interviews of 250 CFOs, finance directors and other executives selected randomly from U.S. companies with annual revenues between $25 million and $2 billion.

CFOs named several factors as significant concerns that could have an impact on the economy, according to this survey.

The effectiveness of U.S. government leaders was cited by 70% of executives, while 61% named the U.S. budget deficit. Other potential impacts chosen by CFOs were healthcare costs (60%), global market unrest (55%), U.S. unemployment levels (54%), consumer confidence (53%) and oil prices (50%).

The biggest increases in potential impacts came in global market unrest, up from 24% in the spring, and U.S. unemployment levels, up from 39%.

“Never in the history of the CFO outlook survey have executives voiced significant concern about this many factors,” noted Laura Whitley (at right), head of global commercial banking at Bank of America Merrill Lynch. “This combination of uncertainly and volatility is understandably made CFOs more cautious. While many CFOs remain optimistic that their own companies will grow, they recognize there are many factors out of their control, and significant concerns remain about the outlook for the economy the rest of this year.”

Other notable findings:

  • CFOs gave the current U.S. economy an average score of 53 out of 100, the same as in the spring. They gave the global economy a score of 45, down from 47.
  • Confidence in their own companies’ 2012 performance was down among CFOs, with 60% percent forecasting higher revenues, down from 64% in the spring, and 44% expecting higher profit margins, down from 50%.
  • Hiring expectations also dipped, with 46% of CFOs predicting more hiring this year, down from 51% in the previous survey.
  • CFO top financial concerns within their own companies were healthcare costs, revenue growth, cash flow and consumer confidence – all of which were in up from the Spring update.
  • The top internal barriers to growth cited by CFOs were an inability to change strategy in response to fluctuations in the industry or customer demand, operational inefficiencies and a limited supply of qualified workers.

Finally, the National Association of Manufacturers (NAM) and the National Federation of Independent Business (NFIB) also conducted a poll – managed by Public Opinion Strategies (POS) – of 800 small business owners, manufacturers and decision-makers at small and medium-sized companies.

That survey found a majority (55%) believe the national economy is in a worse position compared to three years ago, with the chief factors responsible being federal regulations, taxes, government spending and the cost of health insurance and energy, in that order.

Key survey findings from the NAM/NFIB survey are also just as disheartening:

  • Some 67% percent say there is too much uncertainty in the market today to expand, grow or hire new workers.
  • A big 55% say they would not start a business today given what they know now and in the current environment.
  • Finally, 54% say other countries like China and India are more supportive of their small businesses and manufacturers than the U.S.

“The findings of this survey show that manufacturers and other small businesses have a starkly negative outlook for their future with good reason: there is far too much uncertainty,” noted NAM’s President and CEO Jay Timmons.

If anything, all of those surveys indicate more needs to be done to encourage – rather than hamper – the efforts of U.S.-based businesses to expand and grow. Indeed, this would be a good time to do it, too, as the U.S. is becoming a far more attractive place for manufacturing enterprises as concerns increase about the cost and security of global supply chains. That’s an opportunity not to be wasted. 

Discuss this Blog Entry 1

on Mar 4, 2013

In business there are bound to be uncertainties not because the world is going through a financial crisis but because usually the market goes through ups and downs. However, taking help of tools like postage meter is essential to save costs.

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