Outlook Upbeat, but Health Care Fears Loom - StartupWizz | StartupWizz

Outlook Upbeat, but Health Care Fears Loom

CFOs are positive about the economy and hiring despite concerns about health care costs.

More than half of people making financial decisions at private companies had positive feelings about the economy, the highest percentage in five years, according to a new survey by Bank of America Merrill Lynch.

But financial executives are more troubled by the potential impact of health care costs than they have ever been, the report indicates.

The CFO outlook comes from the bank’s mid-year survey, conducted with 250 chief financial officers, and it correlates with a number of studies that have been released in recent weeks that show an improving outlook from private companies, despite an unemployment rate that has remained stubbornly high and the specter of rising interest rates.

“There is a sense for how this has been a gradual, steady recovery since 2008,” Alastair Borthwick, head of global commercial banking for Bank of America Merrill Lynch, said during a Tuesday morning conference-call. “People in this survey expect things to get better.”

Fifty-eight percent of CFOs said they felt optimistic about the economy. The last time survey respondents felt this optimistic was 2008, when 64 percent of CFOs said they felt optimistic about the economy, according to the study.

Similarly, 55 percent of respondents said they expected the economy to expand in 2013, compared to 10 percent who said they expected the economy to contract. The percentage of those who thought the economy would contract shrank by 14 percentage points from the beginning of the year, when the survey was last conducted.

When asked to name things that would have the biggest potential impact on the economy, however, 72 percent of executives named health care costs, up ten percentage points from the beginning of the year, and up 21 percentage points from mid-year in 2012. (See below.) Similarly, 70 percent of executives named health care costs as the most significant concern for their companies, nearly twice the percentage who answered that revenue growth was their biggest concern.

At the time Bank of America conducted the survey, however, the Obama administration had not announced plans to delay by one year the implementation of the Affordable Care Act by businesses, in contrast to uninsured consumers who must start enrolling by October.

“[Health care] is a very significant concern and it’s consistent with my own experience meeting with CFOs from around the country, it is their first topic of conversation,” Borthwick says.

Unlike recent surveys by both the U.S. Chamber of Commerce and private company researcher Sageworks, which indicated that the health care act would cause about two thirds of small companies to delay hiring in the next 24 months, nearly half of businesses said they planned to hire either permanent or contract employees, according to the Bank of America survey. Only ten percent said they planned layoffs. (See below.)

Bank of America Merrill Lynch conducted the survey at companies with revenue between $25 million and $2 billion. Three quarters of the companies are privately held, and they are located throughout the United States. The commercial bank conducted the survey between late April and May. The bank has financial relationships with 30,000 companies nationally.



Outlook Upbeat, but Health Care Fears Loom
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