Improved business climate on the horizon in US, survey says

A majority of finance professionals predict that business conditions in the United States will improve in 2014, especially in the second half of the year, according to a survey by the Association for Financial Professionals (AFP).

Fifty-two per cent of finance executives expect improved business conditions during the next 12 months, up from 46% a year ago and the highest percentage in the survey since before 2008–09.

Corporate treasurers, CFOs and other finance executives, surveyed between November 25th and December 6th, showed less optimism about the first half of the year: 29% predicted improvement, 61% said business conditions would remain about the same, and 10% said they would weaken. For the full year, 52% predict improvement, 33% predict the status quo, and 15% predict a decline.

Respondents believe the US economy will grow by 2.1% and create 1.95 million nonfarm jobs. That’s up from a prediction of 1.7% growth and 1.3 million nonfarm jobs created for 2013.

“While they are not expecting 2014 to be a gangbuster year, on the whole financial professionals do anticipate the US economy will grow for a fifth consecutive year,” the survey said.

Finance professionals, mirroring the outlook in the quarterly economic outlook released by the American Institute of CPAs this month, predict revenue growth for their businesses. Fifty-seven per cent expect to have somewhat more revenue in 2014, and 5% predict to have significantly more. Finance professionals in the Business & Industry Economic Outlook Survey by the AICPA expect their company’s revenue to grow 3.6% in the next 12 months. That’s up from a prediction of 2.1% in the fourth quarter of 2012.

Few companies in the AFP survey are planning to cut jobs in 2014. Forty-three per cent expect their number of US-based employees to grow, compared with 15% who predict a decline. Among companies with employees outside the US, 41% expect to add staff and 8% expect to cut back.

Reaction to low interest rates

More than half (55%) of finance professionals said their companies took at least one step to take advantage of interest rates that, while historically low, rose late in the first half of 2013. Refinancing long-term debt was the most popular strategy (55%), followed closely by issuing long-term debt (52%).

Before the US Federal Reserve’s announcement last week that it would cut bond buying by $10 billion monthly, most respondents felt secure about borrowing costs remaining relatively cheap in the next year: 66% predicted such costs would remain about the same.

Almost half (49%) predict their companies would take at least one action based on expectations for interest rates in 2014. The most likely action (42%) was refinancing long-term debt, followed by reducing debt (37%) and issuing debt to support more capital expenses (36%).

—Neil Amato (namato@aicpa.org) is a CGMA Magazine senior editor.