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AFP 2013 Business Outlook: Caution and Modest Growth Ahead

(December 10th, 2012)

Finance professionals remain cautious in their economic outlook, believing the U.S. economy will grow at a modest pace of 1.7 percent in the coming year, creating an additional 1.3 million jobs, according to a survey released today by the Association for Financial Professionals (AFP).

The AFP Business Outlook Survey, which has tracked business predictions of CFOs, corporate treasurers and other financial executives for the last nine years, found that nearly half of survey respondents (46 percent) anticipate improved business conditions in 2013, with much of this growth occurring in the second half of the year. However, they worry that growth is in jeopardy if U.S. budget issues cannot be resolved quickly.

Respondents indicated that Congress and the White House must act immediately to resolve long-term budget deficits, with over 60 percent believing the solution must be a combination of spending cuts and increased tax revenues.

The threat of a fiscal cliff is already affecting some organizations' hiring and capital investments decisions. Any agreement that defers decisions on fiscal issues is unacceptable to corporate financial executives. Almost two-thirds of organizations say Washington's inability to reach consensus on a number of issues of economic importance makes them at least somewhat more hesitant to make investments for growth.

"Many companies are poised on the brink of growth," said Jim Kaitz, AFP's president and CEO, "but political theater is having a crippling effect on corporate spending and hiring, even corporate decision-making."

In order to improve business conditions and stimulate hiring and investment, respondents believe Washington must agree on a long-term plan to reduce the federal budget deficit. While a majority believes this should be done with a blended approach, 35 percent believe the deficit should be reduced primarily or exclusively with spending cuts, while only 4 percent of respondents emphasized tax revenue increases as the solution to reducing the deficit.

Other actions that could trigger increased corporate growth include reforming corporate taxes and addressing the regulatory burden on corporations, survey respondents said.

A plurality of companies expects to expand payrolls next year, both within and outside the U.S. Forty-two percent of organizations will expand employment in the U.S. during 2013. Among companies that have employees outside the U.S., 41 percent plan to expand further internationally.

From Nov. 26 through Dec. 7, the AFP surveyed U.S. financial professionals about current and expected business conditions, the ninth year it has done so. The survey generated over 1,300 responses from corporate practitioners holding a variety of positions, including CFO, vice president of finance, treasurer and assistant treasurer, employed across a wide range of industries, including financial services. The typical respondent is employed by an organization with annual revenues of $1.5 billion.

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