CFOs Forecast to American Express: Investment in Emerging Markets to Heat Up, Developed Economies Likely to Remain Cool

Thu Jun 6, 2013 1:15pm EDT

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CFOs Forecast to American Express: Investment in Emerging Markets to Heat Up, Developed Economies Likely to Remain Cool

U.S. CFOs Across Multiple Industries Cite Regulatory Concerns;

Latin American and Asian Countries Expect Greatest Increases in Spend & Growth

While global economic conditions remain a concern, senior financial executives in emerging markets1 see the most robust opportunities for growth over the next 12 months. According to recent research from American Express Company (NYSE: AXP) and CFO Research, on average, 76 percent of senior finance executives in emerging markets predict economic expansion in their respective countries. Meanwhile, in the U.S., increased regulation and additional compliance requirements hamper projections for growth from CFOs in a range of industries. Similar caution also appears in select European markets such as Spain and France, however the continuing prolonged recessions are the underlying factors driving these sentiments in these countries.

These were among the findings released today in the sixth annual American Express/CFO Research Global Business and Spending Monitor, a random sampling of senior finance executives in the U.S., Europe, Canada, Latin America, Asia and Australia.

“After years of global economic uncertainty, companies in emerging markets are clearly poised to take advantage of market opportunities and drive growth,” said Shane Berry, Senior Vice President, Global Corporate Payments – Global Client Group, American Express. “That’s not to say that mature economies aren’t also looking to increase investments, but recent history has made them much more cautious.”

U.S. Optimism is High, Investments Dampened by Regulatory Concerns

While the majority of respondents in the U.S. (71 percent) are generally optimistic about economic growth over the coming year, they are restrained in their approach to spending and investment. Only 17 percent of respondents based in the U.S. say they are likely to increase real spending and investment substantially over the next year – the least of any country surveyed. U.S. finance executives are also among the most likely to employ tight spending controls, second only to France (41 percent and 48 percent respectively).

U.S. CFOs say that lingering concerns over new regulation and the costs associated with compliance are having a direct impact on their spending plans, regardless of the industry they work in. Looking at a wide spectrum of industries in the U.S. – from accounting and real estate to food and beverage – 30 percent of all respondents expect a substantial increase in the total cost of compliance with laws being developed. In addition, 45 percent of respondents believe that the total cost of complying with government regulation has already increased substantially over the past five years.

Where You Stand Depends on Where You Work

While regulations and political gridlock weigh on U.S. CFOs, it’s the prolonged economic recession that’s hampering enthusiasm in other developed markets. Of those surveyed, Spain and France have the lowest expectations for economic growth at 43 percent and 39 percent, respectively. In fact, the European malaise appears to be impacting Russia, which is considered an emerging market, yet tracks more closely to its geographic neighbors, likely due to economic ties with euro zone members. Rather than sharing the optimism of their fellow emerging economies, just 39 percent of those executives predict growth for Russia.

In fact, several of the other emerging markets surveyed reported exuberant expectations for economic growth:

  • 100 percent of respondents in Brazil;
  • 94 percent of respondents in China;
  • 81 percent of respondents in Mexico; and,
  • 78 percent of respondents in India.

The 100 percent consensus for growth in Brazil is remarkable. However, perhaps due to recent concerns about inflation and lagging production, Brazilian executives appear to be adjusting planning horizons. The majority (81 percent) says they are likely to shorten their planning cycles in response to increased market volatility.

This bullish view of growth trends is also reflected in respondents’ plans for investments. Emerging market CFOs tend to say they’ll increase spend and investment more substantially than their counterparts in developed economies. In fact, emerging economy respondents are among the least likely to place tight controls on their spending plans. For example, only 3 percent of respondents in China plan to follow that course.

Latin American and Asian Countries More Aggressive on Investment

Just as Russian respondents tend to reflect the caution expressed throughout Europe, few Chinese respondents have plans to maintain tight spending controls, reflecting the overall enthusiasm found in Asian and Latin American countries. Respondents based in India, Argentina, Brazil and China are among the most likely to say they plan to substantially increase spending and investment over the next year, with India and Argentina leading the way at 75 percent.

Expanding market access (such as expansion into new geographies or lines of business) topped the list of key investment areas where respondents expect their companies will invest more than in the previous year. Among all countries surveyed, 54 percent of respondents plan to spend more on market access in 2013. Other areas of investment include:

  • 48 percent for improving production-process efficiency;
  • 46 percent for new product development;
  • 44 percent for administrative process efficiency; and,
  • 40 percent for new production capacity.

“We’re seeing a blend of overall optimism regarding the economy off-set by short-term local concerns, translating into different planning horizons for different markets,” said Berry. “There’s a new normal emerging in the global marketplace where CFOs will demand value from both investments and existing processes, creating a value economy for growth.”

Selected Highlights

Spending and Investment Increases

 
Most Likely to Substantially Increase Spending and Investment
Countries       Percentage
Argentina and India       75%
Brazil and China       71%
Mexico       57%
Least Likely to Substantially Increase Spending and Investment
Countries       Percentage
Canada       31%
France       22%
United States       17%
     

 

Economic Optimism by Country

 
Most Optimistic about Economic Growth
Countries       Expecting Economic Expansion
Brazil       100%
China and Hong Kong       94%
Mexico       81%
Least Optimistic about Economic Growth
Countries       Expecting Economic Expansion
United Kingdom       50%
Spain       43%
France and Russia       39%
     

 

Additional U.S. Findings

 
U.S. CFOs Relatively Optimistic About Growth
Expect to Increase Headcount       50%
Expect More M&A Activity Globally       79%
Predict Economic Expansion in the U.S.       71%
U.S. CFOs Remain Cautious about Spend
Concerned About Political Uncertainty       50%
Do Not Plan to Expand Globally       26%
Plan Modest or Tightly-Controlled Approach to Spend       88%
     

For the full American Express/CFO Research Global Business and Spending Monitor, visit http://about.americanexpress.com/news/.

About American Express Global Corporate Payments

American Express Corporate Payment Solutions provide the Corporate Card, Corporate Purchasing Solutions, and other expense management services to midsize companies and large corporations worldwide. In the U.S., American Express is a leading issuer of commercial cards, serving more than 70 percent of the Fortune 500, as well as tens of thousands of midsize companies. For more information, visit americanexpress.com/corporate.

About American Express

American Express is a global services company, providing customers with access to products, insights and experiences that enrich lives and build business success. Learn more at americanexpress.com and connect with us on facebook.com/americanexpress, foursquare.com/americanexpress, linkedin.com/companies/american-express, twitter.com/americanexpress, and youtube.com/americanexpress.

Key links to products and services: charge and credit cards, business credit cards, travel services, gift cards, prepaid cards, merchant services, business travel, and corporate card.

About CFO Research

CFO Research is the sponsored research group of CFO Publishing LLC, which produces CFO magazine, CFO.com, and CFO Conferences. CFO Publishing, a portfolio company of Seguin Partners, is the leading business-to-business media brand focused on the information needs of senior finance executives. CFO Publishing has long-standing relationships with more than 500,000 finance executives.

1 Emerging markets included in this survey are: Argentina, Brazil, Mexico, Russia, China and India.

kwittken + co.
Glorimar Perez, 646-747-0096
gperez@kwitco.com
or
American Express
Christine Elliott, 212-640-0622
Christine.S.Elliott@aexp.com