Some CFOs say they are cutting back as part of the normal course of business. At Hometown America, an owner and operator of manufactured housing communities, finance chief Tom Curatolo is having a surprisingly good year at a business that is poised in a relatively inexpensive segment of the housing market. The company is turning a profit and is ahead of plan, yet Curatolo says he will cut capital spending by about 5%. He says the firm has overspent in the past on infrastructure in its communities. “Even if the economy were booming, we’d be cutting our capital spending,” he says.
Wait ’til Next Year
The uptick in optimism could indicate that the economy is bottoming out and will improve in 2010, Duke’s Graham says. More than a third of the 540 senior finance executives who responded to the survey say the recovery will begin in the second half of this year, while 30% are looking to the first half of 2010. Another 20% don’t expect the economy to begin to pick up until later next year.
The credit crisis continues to hinder recovery, with 62% of companies at least somewhat affected by increased cost or reduced availability of credit. Firms with credit ratings of B or lower have been most severely affected, with 80% of them feeling at least some impact. Among those with good credit, however, the market tightness has eased somewhat; nearly 40% say conditions have improved since the end of 2008.
Whether CFOs’ optimistic outlooks or pessimistic plans carry the day remains to be seen. Until employment improves, growth will be muted at best, but at least finance executives see hints of recovery.
Of course, what recovery looks like is another difficult question. “When the economy does turn, what’s it going to turn back to be?” asks Prospect Enterprises’s Graham. “I don’t think it will ever be what it was, but what will the new normal be? And can we get there quicker than everyone else?”
Kate O’Sullivan is a senior writer at CFO.