Cap-Ex, Employment To Show Robust Growth

Going forward, 27% of all companies in the survey expect to increase the amount of work sent offshore. Among companies that already employ offshore, 61% expect to increase offshore employment, while only 4% expect to decrease the number of offshore employees.

CFOs report their companies are satisfied with the quality of work being performed offshore. Over half, 53%, say the work quality is above average or excellent, and another 40% say it is at least average. Offshore employment is most notable among manufacturing firms and among firms that have at least half of their sales in foreign markets.

The primary reason jobs are sent overseas is to reduce wages (73%), followed by reduced health care costs (31%), support of overseas operations (27%), and expansion of hours of service (17%).

The jobs being sent overseas are generally low- to moderate-skill. The tasks sent overseas vary and include manufacturing jobs, tech support, programming, engineering, back-office administration, and call and data center functions.

“The trend of increased offshore employment is worrisome from a long-run domestic employment perspective,” said John Graham, professor of Finance at Duke University and the survey’s director. “However … [a]ll indicators point towards a return to a stable, long-run growth trajectory for the U.S. economy and corporate America.”

Other Survey Highlights

The following are CFO predictions:

  • Earnings growth: expected to average a robust 30.6% during the
    next 12 months (median growth of 15%). Earnings increases are
    expected to average more than 30 % for smaller firms (sales of
    less than $1 billion), and about 20 % for larger firms (sales of
    at least $1 billion).
  • Sales revenue: expected to increase by 10% in the next year,
    with large firms expecting an increase in revenues of about 7%,
    and smaller firms expecting an increase of about 15%.
  • Health care costs: expected to increase 10.2%.
  • Price inflation: prices of products are expected to rise 2.8%,
    the highest level of “pricing power” expressed in at least two years.
  • Wages: expected to increase by an average of 3.5%.
  • Mergers and acquisitions: 16% increase in activity expected.
  • Economic optimism: continues at near-record levels with a mean score of
    67.5 (on a scale of 0 to 100). This compares to 55.4 reported one year
    ago but down slightly from the score of 71 reported during the fourth
    quarter of 2003.
  • Company optimism: on the rise, with a mean score of 73.6, an all time
    high. This compares to the company optimism score of 62.7 reported one
    year ago and of 71.5 reported last quarter.
  • GDP prediction: 3.2% growth, down slightly from last quarter’s
    3.6%.
  • U.S. Dollar: to appreciate relative to the euro. By the end of the
    year the dollar is expected to appreciate seven percent and reach an
    exchange rate of 0.86 dollars to 1.0 euros.
  • About the Survey

    The CFO Outlook Survey, conducted by FEI and Duke, interviewed 216 CFOs of U.S. companies electronically in the third week of March. CFOs from both public and private companies and from a broad range of industries, geographic areas and revenues are represented. FEI and Fuqua have conducted surveys gauging the country’s economic outlook from the perspective of corporate CFOs for the past seven years.

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