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Deloitte Survey: CFOs’ Economic Perceptions Hit Multi-Year Lows

October 07, 2019, 07:15 AM
Filed Under: Economy

Chief Financial Officers’ views on the trajectory of North America’s and Europe’s economies hit six-year lows, according to the Deloitte CFO Signals Survey. For the first time in nearly seven years — since Q4 2012 — CFOs’ own-company optimism turned negative.

CFOs’ assessments of North America’s economy peaked in Q2 2018, with 94 percent rating the economy as good, and their views have declined every quarter since then. In Q3 2019, their perceptions of the North American economy fell to a six-year low, with only 68 percent of respondents rating current conditions as good (down from 79 percent last quarter), and 15 percent expecting better conditions in a year (down from 24 percent).

CFOs’ perceptions of Europe’s economy also declined, with 5 percent noting current conditions as good and only 2 percent expecting better conditions in a year. CFOs’ views of China’s current economic conditions decreased back to levels from Q1, with 20 percent indicating they are good (26 percent in Q2), and only 11 percent expecting better conditions in a year (10 percent in Q2).

Own-Company Optimism Hits Seven-Year Low
CFOs’ own-company optimism turned negative for the first time in nearly seven years. In Q2 2019, optimism sat at +9, but this quarter it slid sharply to -5, the first negative reading since the fourth quarter of 2012. When asked about the financial prospects for their company, 26 percent of CFOs expressed rising optimism (down from 30 percent), while 31 percent cited declining optimism (up from 21 percent).

Several Key Metrics Slide to Multi-Year Lows
CFOs’ expectations for revenue growth rose from 3.8 percent to 4.3 percent; their expectations for earnings growth slid from 6.1 percent to 5.6 percent (a new survey low); their expectations for capital spending fell sharply from 7.7 percent to 3.6 percent; and their expectations for hiring dipped from 1.9 percent to 1.6 percent (both sit at three-year lows).

Concerns Over Trade Policy and Europe Continue to Mount
Among CFOs’ top external concerns this quarter were tariffs and their possible effect on global growth. With emerging problems in the European economy and Brexit-related political changes in the U.K., they also voiced stronger concerns about growth in that region. Recently, attention has turned to the possibility of a U.S. and broader global economic downturn—especially as a possible consequence of trade wars and continuing political turmoil.

“CFOs’ assessments of the North American economy’s trajectory hit a new survey low this quarter, with just 15 percent of CFOs expecting better conditions in a year. On top of this, CFOs’ optimism regarding their own companies’ prospects fell to the lowest level in nearly seven years,” said Sanford Cockrell III, National Managing Partner of the U.S. Chief Financial Officer Program, Deloitte LLP

Each quarter, CFO Signals tracks the thinking and actions of leading CFOs representing some of North America’s largest and most influential companies. Since 2010, the report has provided key insights into the business environment, company priorities and expectations, finance priorities, and CFOs’ personal priorities.

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