Financial professionals have plenty to worry about with a double dip recession in Europe, weak consumer demand in the United States, obstinate unemployment and increased regulation. But there is one overarching problem they say is holding back the economy: uncertainty.
In a survey this week, almost 1,000 attendees at the annual conference of the Association for Financial Professionals in Miami Beach said sharply differing scenarios for the coming year complicate financial decision-making for their companies. Without knowing the parameters, they are finding it difficult to "be bold" -- the theme of this year's conference.
The most immediate question of who will be in the White House will be answered in three weeks. But almost two thirds of respondents said the results of the presidential election would have "no significant impact" on the outlook for future business conditions. More than 70 percent said there would be "no significant change" to "anticipated investment spending," following the election.
"It's not like the world is really going to change the day after the election," said AFP director of research Kevin Roth, summarizing the results. "Don't think something magical is going to happen."
More significant, said respondents, is uncertainty around Congressional budget priorities that could result in the so-called "fiscal cliff.'' If the post-election lameduck Congress fails to reach an agreement, a combination of automatic tax hikes and spending cuts mandated under a 2011 budget deal will go into effect Jan. 1.
"Everyone knows Congress is going to reach some kind of compromise -- or is this going to be the time they really don't do it?" Roth said. "I suspect it wouldn't be that way, but why would they even try to mess with that?
The spectre of the "fiscal cliff'' figured prominently on this year's survey, an annual exercise during the conference that drew more than 6,000 treasurers, chief financial officers and company accountants.
When asked about its effect, 50 percent of respondents said their organization's business would "weaken" and 75 percent said "overall economic conditions" would weaken.
The first companies to be affected will be those who sell consumer products, said Wayne Whitaker, a conference attendee from West Palm Beach. Whitaker is the vice president of treasury for energy company Oxbow, which he says is "a little bit downstream" from the immediate effects of the fiscal crisis, but will nonetheless feel the consequences once demand goes down and production slows, requiring less energy.
"I cannot imagine in my wildest dreams that [Congress] could not act responsibly," Whitaker said. But, echoing a common frustration in financial circles, he added, "chances are they'll just kick the can down the road."
Companies also face other unknowns, such as rules for implementing new banking regulations, tax rates and the impacts of all the factors on customer demand. Without such information, executives say they can't make the informed forecasts that help them decide whether to hire or make capital expenditures.
These conditions discourage long-term planning, AFP chief content officer Jeff Glenzer said in an interview before the conference.
"Financial professionals are very flexible, but they can't adapt if they can't trust their assumptions," Glenzer said. "The enemy right now is uncertainty."
Distributed by MCT Information Services
