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Confidence uneven for economic growth

May 30, 2014
The business world still seems to be of two minds when it comes to the potential for economic growth around the globe, with more confidence being expressed by corporate executives in North America compared to those in Latin America, Europe, and elsewhere.

The business world still seems to be of two minds when it comes to the potential for economic growth around the globe, with more confidence being expressed by corporate executives in North America compared to those in Latin America, Europe, and elsewhere.

That’s one of the main findings from the most reason iteration of the CFO Capital Confidence Barometer compiled by global consulting firm Ernst & Young LLP (EY).

While 57% of the CFOs polled by EY believe the global economy is improving, the firm said “striking differences” exist in regional markets, with two-thirds of CFOs from North America confident that economic conditions are improving while fewer than half of CFOs from Latin America, Eastern Europe and Middle East/Africa see their economies growing.

Moreover, confidence in key economic indicators also varies widely by region, EY found. While 66% percent of CFOs from North America are confident when it comes to short-term market stability, only 42% of CFOs from Western Europe and 40% of CFOs from Eastern Europe maintain that sentiment. In addition, a 21-percentage point gap exists between North American and Latin American CFOs when it comes to their optimism around credit availability.

On a side note, take a look at the confidence Old Dominion Freight Line (ODFL) is expressing for LTL growth potential in the second quarter this year. That N.C.-based carrier expects its LTL revenue per hundredweight, excluding fuel surcharges, to grow between 3% and 3.5% over levels experienced during the same period last year – a boost from its previous expectations of 2% to 2.5% growth.

ODFL is also expecting growth in LTL tons per day to be in a range of 14% to 14.5% for the second quarter this year, based in no small part on a 14.1% jump in tonnage experienced this April and a 14.5% uptick being forecasted for May.

Still, despite such data, CFOs in particular are keeping a wary eye on several risks that could upend the economic growth applecart, said Tom McGrath (seen at right), senior vice chair of accounts for EY’s Americas division.

"The results [from EY’s survey] show that on a global basis, most CFOs are confident about economic conditions, but we're seeing this optimism become unstable," he cautioned. "As we scratch the surface, divergent market outlooks do exist in part due to geopolitical risks and slower growth in emerging markets."

In the U.S., for example, political instability, slower growth in emerging markets and Federal Reserve policy are the top three risks CFOs are most concerned with, McGrath noted.

Here are a few other interesting findings from EY’s CFO poll:

  • CFOs are also paying close attention to digital transformation, with 40% of them citing this trend as most likely to impact their overall business strategy. Specifically, automated processes created by improved technology could be contributing to a shortage of skilled talent.
  • Improving confidence in the global economy and a more positive outlook on the deal market is driving CFOs to be more optimistic about the benefits of mergers and acquisitions (M&A). Many CFOs are relying on deals to drive overall growth. Yet despite the fact that CFOs are counting on significant revenue from M&A, deal prospects have slipped from 2013.
  • Nearly nine in 10 CFOs (87%) believe the market for credit is stable or improving, while only 13% foresee a decline. The window for refinancing debt may be closing and just 38% of CFOs plan to refinance.
  • Fewer CFOs are focused on expanding, with just 41% expecting to grow over the next 12 months. This marks a decrease of 11 percentage points from October 2013.
  • What's more, there are dramatic differences in growth strategies across different regions as 50% of CFOs in Western Europe are focused on growth compared to just a quarter of CFOs from Latin America. More CFOs in Middle East/Africa are focused on growth than their counterparts in North America and Asia-Pacific.

In essence, then, while some good trends are shaping it, it’s still not green lights all the way for economic growth – which, frankly, is a scenario most of the business world, trucking included, is quite used to by now.

About the Author

Sean Kilcarr 1 | Senior Editor

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