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BofA Merrill Lynch CFO survey holds positive outlook for 2015

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Modern Money

The U.S. economy has made steady progress since last year, registering an average score of 59 on the Bank of America Merrill Lynch 2015 CFO Outlook survey. This is an increase of six points from last year on the 100-point index, with 100 representing an exceptionally strong economy.

The survey tallies responses from 603 financial services sector executives for firms with revenues between $25 million and $2 billion. Most participants reported a bright outlook for their companies.

“With a steadily improving economy as a backdrop, growth is top of mind for CFOs in 2015,” said Alastair Borthwick, head of Global Commercial Banking at Bank of America Merrill Lynch. “Companies are moving from maintaining their position to growing in earnest by hiring new employees and taking steps to expand.”

Fifty-two percent of survey respondents expected their companies to hire more full-time workers in 2015, the first time in seven years that metric has risen above 50%. Some 63% of respondents said their companies anticipated sales growth in 2015, a large jump from 54% in last year’s survey.

In terms of outlook, 74% of executives polled had a positive outlook for their companies, while only 18% said the outlook was stable. While companies look to grow, they are also looking to manage risk, with more than half of survey respondents saying the time chief financial officers spend on strategy issues is increasing. “Without any question, this is a positive report and we haven’t seen anything like this in 7 years,” Borthwick said “The big story is growth and optimism.”

U.S. Will Lead the Way

Respondents also appear to be less concerned about domestic issues standing in the way of growth in the U.S. Issues like the fiscal cliff and the government shutdown dominated headlines last year, but now they appear to be in the rear-view mirror. “Respondents are definitely seeing the U.S. as leading the world economy,” Borthwick said. While the outlook for the U.S. economy registered a 59, the outlook for Europe was a lower at 51.

Clarity on the Affordable Care Act

Sixty-nine percent of all U.S. companies are reporting that their labor costs will rise to cover the costs associated with the Affordable Care Act, up significantly from 53% last year. On average, respondents said they expect their labor costs to increase 7.1% in 2015. However, Borthwick says respondents might actually be less concerned about ACA. “A year ago, CFOs were concerned about how to predict the costs associated with the ACA. Now things are a bit clearer and they are less concerned … they are seeing that their worst fears are not being realized.” Case in point: Last year, 24% of respondents said they will likely reduce their workforce in order to offset health-care costs. This year, that number fell to 12%.

Evolving Role of the CFO

American CFOs spend two-thirds of their time on tactical activities and one-third of their time on strategic activities, according to Bank of America Merrill Lynch. However, the CFO role is continuing to evolve and take on a broader role beyond finance.

“CFOs expect to dedicate more time to activities aligned with growing and protecting their companies,” Borthwick said. “From sales to risk management, health-care costs to employee retention programs, they are leveraging their broad base of knowledge to influence decisions across their company.”

According to the survey, the four most common risk management programs address data security (92%), disaster coverage/protection (88%), other types of fraud (83%) and operational risk (81%).

Contributing writer: John Davis