CFOs See Economy Expand, Manufacturing Shrink For 2007

Fifty-five percent of CFOs surveyed by Bank of America see the economy expanding and 35 percent see manufacturing shrink.

A recent survey by Bank of America showed that 55 percent of manufacturing CFOs are expecting economic expansion for 2007, down from 58 percent last year and 77 percent the year before that. On a scale of 0 (weak) to 100 (strong) for the current state of economy, CFOs ranked the U.S. economy 67.

Moreover, 26 percent of CFOs see the manufacturing sector will expand in 2007 and 35 percent said it would contract.

Between late-August and mid-October 2006, Bank of America surveyed CFOs from 600 mid to large size manufacturers with revenues of $25 million to $2 billion.

Of those 600 CFOs, 68 percent said they anticipate an increase in revenue next year and 45 percent expect higher profit margins.

Thirty-eight percent of respondents plan to increase capital expenditures to improve revenue growth, while 64 percent of CFOs that sell to foreign markets expect to see a sales increase in the next year. Twenty percent of companies will be part of a merger or acquisition, down from 30 percent in 2006.

“Apparently CFOs are reacting to slowdowns in areas such as housing and the auto industry as they anticipate growth in the manufacturing sector in 2007,” said Joyce White, president, Bank of America Business Capital. “However, it is also clear that with healthy balance sheets, manufacturing CFOs are continuing to look for and find ways to grow their businesses.”

According to Bank of America, since only 39 percent see the U.S. economy doing better than the world economy, 87 percent said they were working overseas and 42 percent said they have international operations, manufacturing is growing globally.

Materials, supplies and equipment were identified as key financial concerns by 84 percent of CFOs surveyed. Fifty-six percent saw labor costs increases for next year and 60 percent said they plan to increase product prices. Also, 79 percent said rising energy costs will affect 2007 product pricing.

“Manufacturers are feeling the strain of higher energy prices, interest rate hikes and increasing healthcare costs,” said Mickey Levy, chief economist for Bank of America. “Nevertheless, they remain fairly confident about profit margins and capital spending plans.”

To view the entire survey, click here.