After two “dismal” quarters, optimism among chief financial officers is on the upswing, according to “Q1 CFO Signals,” a quarterly survey from Deloitte, which includes insurers in its respondents. However, concerns about economic stagnation are causing them to restrain their expectations for sales and domestic hiring this year.

Net optimism, the difference between the percent of CFOs expressing rising and falling optimism, increased to +32 this quarter, up from -11 last quarter. Half of CFOs expressed increasing optimism, while 20 percent expressed rising pessimism. Deloitte characterized this as a major shift, but added that there is a cyclical bias toward optimism earlier in the year, which may be a dominant cause.

“Every year we’ve done the survey, we’ve seen optimism peak in the first quarter only to decline considerably in the following quarters,” said Sanford Cockrell III, national managing partner, CFO Program, Deloitte LLP. “For 2013 to be different, CFOs need some clarification on the public policy front, and enough economic consistency and momentum to feel comfortable investing in growth.”

Uncertainty over public policy seems to be a major drag, as more than 90 percent said current policy decisions/debates, including the debt ceiling, sequestration and possible defense cuts, have some impact on companies’ plans. Tax policy was the number one concern across industries, as three-quarters said it had some impact, and 40 percent said it had substantial or strong impacts.

In the United States, CFOs are worried about the effects of taxing and spending policies on consumer demand and the broader economy. About 40 percent of CFOs said they are initiating or increasing public-policy advocacy efforts, including new or revised government-relations strategies, increased lobbying efforts and an increased executive presence in Washington.

Expectations for year-over-year earnings growth increased to 12.1 percent from 10.9 percent last quarter, compared to 3Q12’s survey-low of 8.0 percent. CFOs’ outlook for capital spending increased to 7.8 percent from 4.2 percent, last quarter’s survey-low.

Sales expectations were stable at 5.4 percent compared to 5.6 percent last quarter. Domestic hiring was 0.9 percent compared to 1.0 percent; 27 percent of CFOs now expect cuts in domestic hiring.

“Although estimates have rebounded from survey lows, most remain below their longer-term survey averages,” said Greg Dickinson, director, North American CFO Signals Survey, Deloitte LLP. “The best news, however, may be that many companies appear well-funded, lean, and ready to grow – and that they are looking for tailwinds and becoming more aggressive in finding growth opportunities.

Highlights from the report:

Economic concerns have shifted to worries about persisting stagnation from worries about crises/collapse.

Boards of directors are focused on income statement metrics and risks to operational performance.

Boards appear relatively less focused on liquidity, investment or raising dividends for shareholders.

Companies are more focused on pursuing opportunity than limiting risk; more on growth and scaling than contracting and rationalizing, and increasing revenue than cost cutting.

There is general agreement regarding the need to cut spending in areas such as Social Security, Medicare and Defense, but no single category received more than 60 percent of the vote.

Managing financial planning and analysis was the most common “core finance” focus area, and half said it was a top-three priority. Managing liquidity, finance strategy and finance talent were next.

The top “business support” priorities were supporting strategy, at 84 percent, and supporting sales, at 46 percent.

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