Economic outlook: manufacturing CFOs souring on sector.

• Author: Marshall, Jeffrey
• Position: BusinessBRIEFS - Forecasts of manufacturing industries

It's something of a spin on a familiar survey finding: CFOs of U.S. manufacturing companies are optimistic that the economy will continue to expand this year, but their outlook for the U.S. manufacturing sector is less upbeat. That compares to the common survey conclusion in which respondents think their company and industry will do well, but aren't so sanguine about the overall economy.

The finding was one of many in the seventh annual Survey of Manufacturing Company CFOs commissioned by Bank of America Business Capital. In the survey, conducted by an independent research firm in last year's fourth quarter, 600 CFOs were asked about an array of financial subjects, including their view of the economy, prospects for revenue growth, financing requirements and plans for mergers or acquisitions.

The most encouraging finding was that 77 percent believe the U.S. economy will expand this year, the highest percentage of CFOs anticipating expansion in the survey's history. Fifty-eight percent of CFOs also believe the U.S. economy will outperform the world economy.

Yet when asked whether the U.S. manufacturing sector would expand, contract or stay the same in 2005, only 44 percent of CFOs responded, "expand." This is a significant drop from the 53 percent who foresaw expansion in last year's survey and the 67 percent who foresaw growth in 2003. Moreover, 24 percent of those surveyed believe the manufacturing sector will contract this year, compared to 16 percent a year ago and only 6 percent in the 2003 Outlook.

Preparing for slower growth may be prudent, according to Bank of America. The Institute for...