Economic Turnaround On Horizon, Say CFOs

Compiled ByDavid Drickhamer Barring another terrorist attack on the United States, a slight majority (51%) of CFOs from midsized manufacturing firms believe the economy will emerge from recession by the end of second-quarter 2002. Only 7% don't see a recovery until 2003. That's according to a survey sponsored by Fleet Capital Corp., a Glastonbury, Conn.-based financial company. The survey questioned 300 manufacturers with annual sales ranging from $25 million to $500 million. Despite this general turn for the better, only 51% of respondents believe total revenues for their particular company will increase in 2002. The previous year's survey found that nearly three-quarters of the respondents anticipated year-to-year sales growth for 2001. A vast majority of CFOs (83%) applauded the Federal Reserve Board's interest-rate cuts, believing that the cuts have helped pave the way to an economic recovery. When it comes to financing, 83% of CFOs expect their financing needs to increase (32%) or stay the same (51%) in 2002. By financing type, midmarket manufacturers are most reliant on bank financing to fund their growth, followed by self-funding, private equity and leasing. Almost two-thirds of survey respondents expect their cost of financing to stay the same or decrease in 2002. When queried about labor costs, most CFOs said they expected labor costs to either stay the same (36%) or decrease (15%) in 2002. Still, 47% of financial chiefs expect their labor costs per unit to increase, and three out of five say they won't be able to pass those cost increases on to their customers.