Expect positive business conditions, but identify energy cost volatility and value of the U.S. dollar as potential threats according to 2007 AFP business outlook survey
Financial professionals are cautiously optimistic about economic growth in 2007, according to a new survey conducted by the Association for Financial Professionals (AFP). Forecasting modest growth for the year ahead, survey respondents expect their organizations to expand their U.S.-based workforces in the coming year. However, financial professionals also cite factors including volatile energy costs, the declining value of the U.S. dollar and rising health care costs as issues of concern.
While financial professionals are positive about 2007 overall, they were more optimistic a year ago in December 2005. Forty-nine percent expect business conditions in 2007 to remain the same as they were in 2006, while 32% expect conditions to improve. Survey respondents expect modest growth in gross domestic product (GDP), predicting a median GDP growth rate of 1.7%. Only one in five financial professionals expects business conditions to deteriorate in 2007.
Further, financial professionals see prices remaining under control in 2007. Survey respondents expect modest growth in consumer prices during 2007, predicting a median CPI growth of 1.8%.
"The stable economic and positive employment outlook is good news," said Jim Kaitz, president and CEO of the Association for Financial Professionals. "AFP members are in a unique position to observe business conditions that affect their organizations. They must make assumptions about how business conditions are likely to change in both the short and intermediate term and make strategic business decisions—including those concerning borrowing and investments—based on these assumptions."
Financial professionals are generally positive on the employment outlook for 2007. Forty-six percent report that their organization plans to increase its U.S.-based workforce, 37% expect their organization to maintain its workforce at current levels. Only 13% expect their organization to shrink its workforce in the coming year. Smaller companies were more likely to expect workforce growth than larger organizations. More than half (54%) of companies with annual revenues below $500 million expect workforce expansion in the U.S.
Survey respondents also identified a number of issues that could impact business conditions and economic growth in 2007. More than two-thirds (68%) expressed concern about volatility in the energy markets and the possibility of sharp increases in energy costs inhibiting growth. The decline of the U.S. dollar against other currencies is a concern, with 59% of respondents seeing the value of the dollar as a factor affecting 2007 business conditions. A perennial issue, rising health care costs, was cited by 58% of respondents as a major concern.
Financial professionals are not as concerned about rising interest rates—the most widely identified factor in AFP’s December 2005 survey. In last year’s survey, three-quarters of respondents expressed concern about rising interest rates; in the current survey, only 39% cite rising interest rates as a major factor affecting 2007 business conditions.
Survey respondents are generally positive about their organizations’ access to both short- and long-term credit over the past six months. Almost all survey respondents reported that their organizations access to credit remained the same or increased over this time period. Further, almost 90% of respondents indicated that credit terms and covenants had not changed or even had eased in 2006. Further, few financial professionals believe their organization’s access to credit will deteriorate in 2007.
Source: Association for Financial Professionals