Optimism Among Companies Eases in Second Half of 2015
Optimism among chief financial officers about the U.S. economy dimmed in the second half of this year, helping explain why companies plan to temper spending on equipment and hold more cash in 2016.
The Duke University/CFO Global Business Outlook’s latest gauge of sentiment stood at 60.3 in December, down from 63.7 at the end of 2014. The index was little changed from a third-quarter reading of 60. Some 26.1% of CFOs this quarter said that they were more upbeat about the economy, down from 50.3% a year ago.
“U.S. companies indicate that slowing growth in China, along with low energy prices and a strong dollar among export firms, are curtailing spending plans,” John Graham, a finance professor at Duke, said in a statement.
While oil and gas companies will reduce capital spending by 35% in 2016, CFOs in services/consulting, transportation and technology said they expect no increase, according to the survey results of 464 American companies. At the same time, wages will rise 2.9% as two of three U.S. businesses plan to keep adding to headcounts, indicating productivity will languish.
A more guarded outlook about the economy is one reason firms anticipate cash on corporate balance sheets will climb 6.3% in 2016.
“In 2013, firms were also accumulating cash at about this year,” Graham said. Better earnings growth and fewer share repurchases also explain why companies expect higher levels of cash.
Finding and retaining qualified workers is among the top concerns, which also include regulations and higher costs for health care.
