Growth Returns to the Agenda, according to EY Study

In EY’s recently released CFO Capital Confidence Barometer, the sentiment among the CFOs and other Executives interviewed is that growth has returned to the agenda.  Some highlights include:

“For the first time in two years, a majority of CFOs report that their organizations are concentrating on growing. Key findings show

  • 55% say that their companies are focused on growth
  • 35% say that maintaining stability is their primary focus
  • 60% feel that the global economy is improving
  • 43% feel that employment will grow in the next 12 months
  • 50% consider availability of credit to be improving
  • 67% expect global M&A/deal volume to increase in the next twelve months
  • 28% anticipate pursuing acquisitions in the next year

CFOs feel more optimistic today about key economic indicators such as economic growth, access to credit and employment growth than they did in October 2012. This confidence is compelling more of them to refinance their obligations, pay down debt and look to strategic deals.  However, despite a mood of relative confidence, finance executives and their organizations seem to be taking a very disciplined approach to growth, says Tom McGrath, EY Americas Senior Vice Chair.”

The study makes several conclusions, that include:  “Today, executive leaders seem to have finally moved out of a worst-case-scenario mode….Their optimism in the global economy is driving more of them to put their capital at work.”

Although the sentiment about the economy from those interviewed (over 1600 executives in 72 countries) was less optimistic when it comes employment growth and improvement of the availability of credit, there is great anticipation for increased mergers and acquisitions activity.

Last Thursday, the S&P 500 and the Dow Jones Industrial Average recorded their worst weekly losses in more than a year.  Stock market volumes on Thursday and Friday were up considerably.  Although the S&P dropped 38 points, it represents only a 2% decline.  The 318 point drop in the DJIA also represented about a 2% decline. According to MarketWatch:

“Investors began selling stocks and emerging-markets currencies heavily on Thursday following weak Chinese economic data. The sharp selloffs on Wall Street prompted some analysts to call it the beginning of a long-awaited correction.”

Despite some renewed optimism from global financial executives, many companies may remain conservative in their outlook given the recent news regarding the slowdown China’s manufacturing and uncertainties related to the global economy.

For a complete copy of EY’s December 2013 CFO Capital Confidence Barometer, click here.

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