Right now, CFOs are the most positive they've been on the U.S. economy since 2008.
This confidence, captured in the Bank of America Merrill Lynch 2014 CFO Outlook, extends to the hiring forecast: 9 out of 10 executives said in the annual survey that they expect to increase or maintain the size of their workforce. Many companies may need that extra personnel, as more than half of the CFOs predict higher sales in 2014, driven by increased demand from existing customers and greater expansion into international markets.
There's one catch: Amid the positive views, one very big risk has captured CFOs' attention, and it's tied directly to the workforce, and health care benefits in particular: unanticipated labor costs. Eight out of 10 executives said they were somewhat or very concerned. That outpaced market risks, operational risks, succession planning and several other concerns.
CFOs said health-care costs would have the biggest potential impact on the U.S. economy—more than the effectiveness of the U.S. government and the U.S. budget deficit.
Three-quarters of CFOs said their companies are completely or mostly ready to comply with the Affordable Care Act (ACA). As for how they'll comply, two-thirds of executives said their companies will keep their existing health-care coverage, while one-fourth said they would either shift more costs to employees or increase deductibles associated with existing coverage.
Layoffs aren't expected, but 53 percent of CFOs said their companies' labor costs will increase as they comply with Obamacare, and of those executives, 77 percent expect their companies to increase health-care costs per employee to offset higher labor costs.
Confidence vs. costs
Overall, the latest CFO Outlook shows higher optimism at middle-market companies—those with annual revenues of $25 million to $2 billion. Consider the following results:
• Executives gave the U.S. economy a score of 53, up from 49 a year ago and the first time above 50 since 2008.
• Of the CFOs surveyed, 47 percent said the economy will expand, compared to just 39 percent a year earlier. Only 12 percent predict contraction, down from 24 percent in the 2013 outlook.
• Most CFOs think they can avoid layoffs, with 47 percent expecting their companies to hire more employees and 43 percent forecasting no changes to the size of their workforce.
(Read more: Google Glass for the workforce)
Paths to growth
Even with those concerns, CFOs overwhelmingly expect to pursue at least one growth strategy in 2014, in line with their greater optimism versus a year ago.
The most common course identified in the CFO survey is greater market penetration—going deeper with their current customer base and selling more products and services. More than 80 percent of CFOs expect to follow that route, and nearly as many said their companies would also grow through new customers or new markets. By comparison, almost 60 percent expect to introduce new products or services, while 25 percent will explore an acquisition.
Expansion won't be limited to the U.S. More than half of the executives in the survey said their companies do business in non–U.S. markets. Of those CFOs, more than 90 percent expect their revenues from international sales or operations to increase or remain the same next year.
There's no question uncertainty lingers in some areas, especially health-care reform. But the Bank of America Merrill Lynch CFO Outlook reveals an uptick in optimism, which bodes well for middle-market companies and the economy overall.
—By Alastair Borthwick, head of global commercial banking, Bank of America Merrill Lynch