At last, some good news. For the first time in more than a year, finance chiefs expect double-digit growth in earnings and significant growth in capital spending over the next 12 months, according to the Duke University/CFO Magazine Global Business Outlook Survey for the first quarter of 2010. Finance chiefs are also loosening the reins on technology spending, research and development spending, and marketing and advertising spending.

The welcome news doesn’t come without a few troubling reservations, however. The expected 15% growth in earnings and 9% growth in capital expenditures start from low bases after a dismal couple of years. And employment will continue to be a drag on the recovery, with CFOs saying they expect to expand their full-time domestic workforces by less than 1% over the next 12 months.

Temporary hiring will also increase by less than 1%, say CFOs. Outsourced hiring will grow by 4%, indicating companies’ reluctance to commit to full-time workers amid ongoing uncertainty. More than half of finance executives say they do not expect their firms to return to prerecession staffing levels before 2012.

Nonetheless, nearly half of CFOs are more optimistic than they were last quarter, while 14% are less optimistic and 39% say their optimism levels are unchanged. “What I think has changed is that for the 80% of the population that is fully employed, there’s less worry that they’re going to lose their jobs,” says Mark White, CFO of SAP America, the enterprise-software giant. “They have a lot more confidence than they did a year ago.” White says increased spending by this group should trickle through the economy for the first half of the year.

He hesitates to claim a recovery, however. “What worries me is that there’s still no hiring and there are a lot of people who are still underemployed,” says White. “Until that’s fixed, the economy doesn’t really come back.”

Gayle Anderson, CFO of online dating site, a division of IAC, shares White’s concern, even though her company’s business held up well through the recession. “If this is truly a jobless recovery, the longer people are out of work, the more they will start cutting back on anything that is not a staple,” she says.

Tight credit also poses an obstacle to a robust recovery. Seventy percent of finance chiefs at small and midsize businesses report that credit conditions are worse or much worse compared with the summer of 2008, prior to the collapse of Lehman Brothers. Even among firms with more than $10 billion in annual revenue, 40% say borrowing is more difficult now.

Still, positive trends in many key spending categories are a noteworthy change from three months ago, when CFOs were predicting more layoffs and extremely limited spending on everything from capital equipment to technology. Says Anderson, “I’m encouraged by the fact that things are at least not getting worse.”


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