Cap-Ex, Employment To Show Robust Growth
An increase in capital spending is expected at 69% of companies over the next 12 months, with an average increase of 11%; more than double the five-percent increase expected last quarter. This quarter's cap-ex forecast is dramatically higher than predictions of just 18 months when companies anticipated contracted spending.
Tech spending is expected to increase four percent at 75% of the surveyed firms.
In another positive trend, CFOs predict strong employment growth. Nearly three-fourths of surveyed companies plan to increase the number of employees in the coming year, while only 7% expect to reduce employment.
Overall, the number of employees should increase by a robust 5%. This is a significant improvement over expectations of the past three years when forecasts ranged from a decline to less than 2% growth.
"CFOs hold the corporate purse strings," noted Colleen Sayther, president and CEO of FEI. "Most have been managing in an environment where spending at a 'normal' rate was not the norm, and spending 'ambitiously' was virtually non-existent. Their predictions this quarter about an improvement in capital expenditures is very good news for the economy, and combined with their predictions about employment levels, very good news for the nation's workforce."
One-quarter of companies in the March survey say their firms outsource to offshore locations. Averaged across all companies, including those that do not offshore any employment, 8% of total employment is located outside the United States. Among the companies that do already offshore, 18% of their workforce is non-U.S. workers.Going forward, 27% of all companies in the survey expect to increase the amount of work sent offshore. Among companies that already employ offshore, 61% expect to increase offshore employment, while only 4% expect to decrease the number of offshore employees.
CFOs report their companies are satisfied with the quality of work being performed offshore. Over half, 53%, say the work quality is above average or excellent, and another 40% say it is at least average. Offshore employment is most notable among manufacturing firms and among firms that have at least half of their sales in foreign markets.
The primary reason jobs are sent overseas is to reduce wages (73%), followed by reduced health care costs (31%), support of overseas operations (27%), and expansion of hours of service (17%).
The jobs being sent overseas are generally low- to moderate-skill. The tasks sent overseas vary and include manufacturing jobs, tech support, programming, engineering, back-office administration, and call and data center functions.
"The trend of increased offshore employment is worrisome from a long-run domestic employment perspective," said John Graham, professor of Finance at Duke University and the survey's director. "However ... [a]ll indicators point towards a return to a stable, long-run growth trajectory for the U.S. economy and corporate America."
Other Survey Highlights
The following are CFO predictions:
About the Survey
The CFO Outlook Survey, conducted by FEI and Duke, interviewed 216 CFOs of U.S. companies electronically in the third week of March. CFOs from both public and private companies and from a broad range of industries, geographic areas and revenues are represented. FEI and Fuqua have conducted surveys gauging the country's economic outlook from the perspective of corporate CFOs for the past seven years.
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