Confidence in economic growth declined sharply in the latest Bank of America Merrill Lynch CFO Outlook survey, with U.S. financial executives expressing concerns about several potential impacts on the nation’s economy.

Only 36 percent of financial executives surveyed in the CFO Outlook Fall Update said they expect the economy to expand in 2012, down from 63 percent in the Spring Update earlier this year. At the same time, 13 percent said they expected the economy to contract, compared to 4 percent in the previous survey. The latest responses are similar to the 2012 CFO Outlook annual survey conducted in the fall of 2011, when only 38 percent of executives said they expected economic expansion this year.

CFOs named several factors as significant concerns that could have an impact on the economy. The effectiveness of U.S. government leaders was cited by 70 percent of executives, while 61 percent named the U.S. budget deficit.

Other potential impacts chosen by CFOs were healthcare costs (60 percent), global market unrest (55 percent), U.S. unemployment levels (54 percent), consumer confidence (53 percent) and oil prices (50 percent).

The biggest increases in potential impacts came in global market unrest, up from 24 percent in the spring, and U.S. unemployment levels, up from 39 percent. Never in the history of the CFO Outlook survey have executives voiced significant concern about this many factors.

“The combination of uncertainly and volatility have understandably made CFOs more cautious as the year progressed,” said Laura Whitley, head of Global Commercial Banking at Bank of America Merrill Lynch. “While many CFOs remain optimistic that their own companies will grow, they recognize there are many factors out of their control, and significant concerns remain about the outlook for the economy the rest of this year.”

Other notable findings in the survey:

• CFOs gave the current U.S. economy an average score of 53 out of 100, the same as in the spring. They gave the global economy a score of 45, down from 47.
• Confidence in their own companies’ 2012 performance was down among CFOs, with 60 percent forecasting higher revenues, down from 64 percent in the spring, and 44 percent expecting higher profit margins, down from 50 percent.
• Hiring expectations also dipped, with 46 percent of CFOs predicting more hiring this year, down from 51 percent in the previous survey.
• CFOs’ top financial concerns within their own companies were healthcare costs, revenue growth, cash flow and consumer confidence – all of which were up from the Spring Update.
• The top internal barriers to growth cited by CFOs were an inability to change strategy in response to fluctuations in the industry or customer demand, operational inefficiencies and a limited supply of qualified workers.

Conducted by Granite Research Consulting, the CFO Outlook survey helps Bank of America Merrill Lynch better understand how financial executives view the economy. The results were compiled from interviews of 250 CFOs, finance directors and other executives selected randomly from U.S. companies with annual revenues between $25 million and $2 billion.

Interviews were conducted from mid-June to mid-July. The margin of error is +/-6 percent.

Read the latest Bank of America Merrill Lynch 2012 CFO Outlook Survey Report - Fall Update.