While U.S. finance executives are less optimistic than last year, their confidence in the U.S. economy remains above the global average of 65%.
According to a new survey from American Express and CFO Research, 75% of U.S. finance executives report that their companies’ revenues are higher now than a year ago, outperforming any other country by at least 10 percentage points.
A similar number of U.S. executives (73%, down from a survey high of 83% last year) are predicting economic expansion during the next year. In fact the U.S. also shows the largest increase in executives saying they have aggressive spending and investment plans in order to boost top-line revenue (31%, up dramatically from 13% in 2015).
The findings in the ninth annual American Express/CFO Research Global Business and Spending Monitor are based on a sampling of 651 senior finance and corporate executives from large companies located in 15 countries in North America, Europe, Latin America¹, Asia and Australia.
Even as senior finance executives worldwide are more guarded in their outlook for 2016, they remain committed to progress for their companies. Nearly nine in ten (87%) executives surveyed say their companies are planning to increase total spending and investment in 2016, and nearly half (49%) say they are planning increases of 10% or more. However, 61% of survey respondents say that political and economic uncertainty will make them more cautious.
As they look to grow their enterprises, finance leaders are seeking stability and security where they can find it and will focus on:
• Optimizing cash (68%)
• Strengthening sales in domestic markets (41%)
They will spend wisely on areas tied to growth by spending and investing more in areas such as:
• New product/service development (32%)
• Improving production efficiency (31%)
• Technology, including:
◦ Mobile technology (31%)
◦ Enterprise-level IT (29%)
◦ Hardware and infrastructure (28%)
◦ Headcount expected to increase by 9% on average in 2016
While the North American outlook remains positive overall, Canadian finance executives are less optimistic about their economy than their American counterparts (63%, down from 73% last year). Despite Canada’s decline in confidence, North America is the only region for which this year’s survey respondents report better top-line performance than did last year’s respondents.
On average, North American respondents expect their companies’ planned levels of spending and investment to increase by 13%. At the country level within North America, the U.S. averages higher at 14%, double the 7% response for 2015, while the Canadian average is 11%, unchanged from 2015.
More than one-third of American finance executives will increase spending on enterprise-level IT systems (34%). One-third of Canadian businesses will increase spending on production inputs including raw materials and intermediate goods (33%). The top priority for technology spending for both Canadian (38%) and U.S. (36%) finance executives is business intelligence and data analysis capabilities.
In North America, finance executives expect hiring to increase 12%.
The U.S. (13%) is among those countries at the top of the list predicting an uptick in hiring. Canadian executives expect a 9% increase in hiring. U.S. companies say their performance goals have been affected most by difficulty in hiring skilled or specialized workers (57%). In Canada finance executives cite difficulty in hiring both management and skilled or specialized workers (each, 50%). In order to address their hiring challenges, both Canadian (70%) and U.S (52%) companies will make greater use of temporary or contract workers.
In Europe, executives have more moderate expectations for economic expansion, with 62% of respondents expressing optimism. The U.K. is most positive, with three-quarters (75%) expecting economic expansion. France’s level of optimism increased significantly from last year’s historic lows (29%) to reach 47%. Offsetting these gains are declines in economic optimism seen in Germany and Russia versus 2015, falling to 58% (from 67%) and 44% (from 55%), respectively.
French executives ascribe their increase in optimism to favorable trade agreements and improving economies elsewhere, as well as to continued financial restructuring and the positive effects of M&A. Germany’s decline may reflect concerns over a slowdown in exports to emerging markets, whereas Russia is facing recession and rising inflation.
On average, respondents in Europe expect to see an increase in hiring of 6%. Finance executives in the U.K. are most likely to plan to hire (9%), followed by Germany (6%) and Russia and France (both, 3%). In the U.K (62%) and Germany (43%) companies say their performance goals have been affected by difficulty in hiring skilled or specialized workers. French finance executives cite shortfalls in hiring IT staff (35%) and Russian executives cite difficulty filling manual or unskilled labor positions (32%). To combat their hiring challenges, companies in France (42%), the U.K. (41%), Germany and Russia (each, 38%) will make greater use of temporary or contract workers.
In Asia/Australia a majority of respondents (59%) anticipate economic expansion over the next year. But there is significant variability in expectations for individual economies. India continues to have the highest optimism in the region (86%), reflecting aggressive spending and investment plans and a commitment to innovation and growth. Australia registered an increase to 64% (from 60% last year), in part reflecting an increasing shift toward focusing on consumer demand to offset its historical reliance on mining and commodity exports, particularly to China.
However, the region’s outlook was severely undercut by a 20-point drop in optimism in China (to 58%), where companies face production issues, unfavorable exchange rates, and currency devaluation. Singapore (60%, down from 70%) and Hong Kong (30%, down from 50%) also saw double-digit declines from 2015 levels.
On average, respondents in Asia/Australia expect to see an increase in hiring of 8%. India is among those countries expecting to increase hiring the most (by 13%), followed by Australia (by 10%), Singapore and Japan (each, by 8%), China (by 6%) and Hong Kong (by 5%).
Executives in Hong Kong (66%) say their performance goals have been affected by difficulty in hiring skilled or specialized workers. In India (70%), China (68%) and Japan (53%) finance executives cite difficulty in filling sales and marketing positions. In Singapore companies say they have difficulty hiring management and skilled or specialized workers (each, 58%).
Finance executives in Australia cite difficulty hiring management (55%) and in finding IT staff (53%). In order to address their hiring challenges, companies in Singapore (59%), Japan (55%), Hong Kong (53%) and Australia (47%) will make greater use of temporary or contract workers. Companies in both India (63%) and China (56%) will move some positions from overseas to domestic locations.
In Latin America, 73% of respondents anticipate expansion in 2016. The strong showing for the region is led by large increases over last year’s survey in optimism in Mexico (79%) and Argentina (73%). In the case of Brazil, an eight-percentage-point decline from the prior-year level of economic optimism still places that country near the global average, coming in at 67%.
In Latin America, Mexico is near the top of the global list of countries anticipating an increase in hiring (by 13%) followed by Argentina (by 10%) and Brazil (by 7%). In Argentina (58%) and Mexico (55%) companies say their performance goals have been affected by difficulty in hiring skilled or specialized workers.
Brazilian finance executives cite shortfalls in hiring for sales and marketing positions (54%) and for manual or unskilled labor (53%). To combat their hiring challenges, Argentine companies will move some positions from overseas to domestic locations (58%) and companies in Mexico (51%) and Brazil (49%) will make greater use of temporary or contract workers.
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