2016 Q3 Global CFO Signals


2016 Q3 Global CFO Signals™

External shocks; Internal resolve

Over the past year, CFOs have dealt with plenty of surprises—equity market volatility at the beginning of the year, swings in currency and commodity prices, and the unexpected Brexit vote in the UK in June. The 2016 Q3 Global CFO Signals report saw palpable anticipation over the US presidential election outcome.

How does CFO sentiment in 2016 Q3 break down? What follows is a synopsis by region:

  • Argentina: Optimism continues to be bouyed
  • Austria: Mixed confidence levels
  • Belgium: Persistent focus on investments
  • China: Worries of further economic turmoil remain
  • Finland: Uncertainty remains elevated
  • France: Ready to grow
  • Germany: Economic prospects unclouded
  • Ireland: Growth amid global uncertainty
  • Italy: Weakening economic outlook
  • Japan: A tempered outlook
  • Netherlands: Brexit and the return of concern
  • North America: Tenor of worldwide geopolitics creating concerns
  • Norway: Rising optimism ahead
  • Portugal: Reduced confidence promotes risk aversion
  • Spain: Political instability poses risk to enterprise growth
  • Sweden: Increased worries about business climate—and business position
  • Switzerland: Higher growth rates back on the horizon
  • Türkiye: Heightened geopolitical uncertainty
  • United Kingdom: Brexit looms large

*All numbers in the North American survey with asterisks are averages that have been adjusted to eliminate the effects of stark outliers.

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View or download the report for more on CFO sentiment.

CFO Sentiment 2016 Q3

The hits just keep on coming.

Over the past year, CFOs have dealt with plenty of surprises—equity market volatility at the beginning of the year, swings in currency and commodity prices, the unexpected Brexit vote in the UK in June, and now the outcome of the US presidential election.

While all of the 19 surveys in the Q3 2016 edition of Global CFO Signals were conducted prior to the US vote, the anticipated impact was palpable. In the North American CFO Signals report, for example, CFOs were asked about the election’s expected impact on their companies’ performance and business planning. Eighty-five percent said the future performance of their companies would depend at least somewhat on the election’s outcome, and 57% said the election was affecting their planning. “There is no doubt we have been underestimating the extent of populist movements,” said Patricia Buckley, Managing Director, Economic Policy and Analysis, Deloitte Services LP, adding that “for planning and forecasting purposes we need to consider these impacts.

Others in the Deloitte Global Economist Network, which operates in nine countries, agree. Several countries, including Austria, France, Germany, Italy, and Netherlands, face upcoming general elections or referendums. Given recent events, it would behoove CFOs to be prepared for the kind of “shocks” that roiled the UK with Brexit and the US with the election, notes Ian Stewart, Chief Economist, Deloitte UK.

Other areas that may offer surprises include the impact on trade policy under the new US administration, and broader questions about the future of de-globalization, which could have significant impacts on business. In addition, the longer-term impacts of Brexit, for example, should not be underplayed. Says Alexander Boersch, Head of Research, Deloitte Germany: “There are many Brexit scenarios, some of them uglier than others,” adding that “it is better to be prepared in order to mitigate.

Despite all these overhangs, many CFOs remain upbeat regarding their own companies’ indicators. Driven by positive improvements in Germany and France, for example (+12 percentage points (pp) and +13pp, respectively), the outlook for revenues in Europe (the UK being a notable exception), for example, is quite positive; ditto for margins (with the exception of Austria, Switzerland, and the UK). In North America, the expectations for revenues and margin improvements are more muted. On the other hand, capital investment growth expectations, which bottomed out at just 1.7%* in Q1 2016, rose to 5.6%* this quarter—well above the 4.7%* average over the past two years. And in Japan, CFOs’ earnings outlook improved, with 48% saying they expect increases, up from 23% in the previous quarter.

Those positive signs are encouraging, according to the economists interviewed. But with so much uncertainty, it is not surprising that risk appetite remains low and defensive strategies are on the upswing in many countries. The corporate sector is no longer constrained by capital, but “by uncertainty and limited opportunities,” says Stewart.

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Regional perspectives


The multiple geopolitical risks facing companies were felt throughout North America this quarter. Still, while net optimism1of +19.7 is down from last quarter’s +30.0 (which came after a dismal +1.7 in the first quarter), it continues to indicate considerable strength. North American CFOs’ assessments of the their economy’s future performance, however, were well below their longer term average, and their perceptions of Europe’s economy—already weak before the Brexit vote—fell sharply for both its current state and its trajectory. Meanwhile, in the one South American country reporting—Argentina—CFO outlooks remain strong, but down somewhat from six months ago when they were enamored with newly elected President Mauricio Macri’s economic policies. Still, 61% of Argentina’s CFOs (down from 80%) have an increasingly optimistic view toward their company prospects than six months ago and 74% (down from 100%) toward their industry.


Both countries reporting in Asia-Pacific—China and Japan—continue to report tempered outlooks this quarter. In Japan, however, there has been some stabilization with 69% of CFOs saying their outlooks are “broadly unchanged,” compared with three months ago, up from 50% last quarter. There, the majority of respondents view possible limitations of the Bank of Japan’s monetary policy as a plausible risk scenario for the coming year for the Japanese economy. They are also concerned about what effect the new US administration’s policies will have on the overall global free trade system (including the possible failure of the Trans-Pacific Partnership) as well as on possible future destabilization of European politics. Meanwhile, in China, where CFOs continue to adapt to the “New Normal,” 38% report being less optimistic about economic prospects compared with the last three months, down from 50% six months ago. Risk factors going forward included future economic turmoil or even recession as well as detrimental political uncertainty.


The Brexit vote took a toll on European CFOs, as reported in the latest European CFO Survey. In the 15 countries reporting, CFOs overwhelmingly see many more potential negatives than positives from the outcome, particularly, in the UK, where 65% believe it will have a negative impact, Portugal (52%), Netherlands (48%), and Ireland (48%). In terms of individual countries, however, there is optimism. CFOs in Sweden are the most optimistic, with a net balance of +31% reporting growing optimism, reflecting the continued strength of the Swedish economy, with that country still on course to record one of the fastest growth rates—3.3%— across Europe this year. Meanwhile, Norway has benefitted from the stabilization of oil markets, with the price of a barrel of Brent crude rising almost 19% between April and September. Sentiment and risk appetite among CFOs in Germany improved as well, buoyed by continued signs of resilience in the German economy. According to the European CFO Survey, “as Europe’s largest economy, the positive outlook for Germany is a boost for European growth prospects more generally.”

What’s next? According to the Deloitte economists, there may be plenty of surprises to come, citing the slew of upcoming elections. Still, adds Stewart, CFOs continuously deal with crisis and recovery in one way or another as part of their jobs. “This is another reshuffling of the deck.”

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Global CFO Signals - By the numbers

Risk appetite

With European optimism barely improving and perceptions of uncertainty remaining elevated, CFOs continue to be risk averse overall with none of the countries reporting a net positive view toward taking greater risk onto their balance sheets. In the UK, the impact of the Brexit vote can once again be seen, with a further deterioration in CFO risk appetite between Q1 and Q3 (-15%). Meanwhile outside of Europe while optimism remains low, it has improved from Q1 2016 in Argentina by 31% and in China with 8% of CFOs reporting more optimism.


Emerging challenges from the Brexit vote, deflationary pressures on the Eurozone, growth challenges in China, and the US presidential election, are giving businesses plenty of uncertainty to worry about. In Europe, perceptions of uncertainty are highest in Germany and the UK, where a net balance of 88% and 87% of CFOs respectively report heightened levels. Meanwhile, in Japan, the number of CFOs who consider the level of uncertainty as “high” or “very high” has decreased to 56%, down from 73% in Q2 and 80% in Q1.


In the US, this quarter’s 4.2% expectation for year-over-year revenue growth is up from last quarter’s 4.0%, but still among the lowest in the survey’s history. The positive averages for revenues in Europe would look even better without the UK’s sharp fall in revenue expectations, driven by positive improvements in Germany and France (+12pp and +13pp respectively). Meanwhile, CFOs in Finland, Italy, and Sweden are most optimistic about margins. In line with decreasing levels of uncertainty, 48% percent of Japanese CFOs expect an increase in earnings.


Despite a deterioration from Q1 due to the large post-referendum declines in the UK, the European outlook for hiring over the next 12 months also remains positive. Between the first and third quarters, the employment outlook improved in Austria, Belgium, France, and Finland and, outside the EU, in Switzerland and Türkiye. Similarly in North America, this quarter’s domestic hiring growth expectation of 2.3%* is well above the 1.1% to 1.4% levels seen over the last year and a half (and Q1 2016’s low of 0.6%).

Corporate strategy

A general theme across surveys is proceeding with caution. In fact, in Austria, Sweden, and the UK, top priorities have changed from expansionary to defensive strategies. The trend is not across the board, however. Notwithstanding the continued importance of cost cutting, 70% of Belgium’s CFOs report expansionary strategies are more important than defensive strategies. In addition, nearly 52% of North American CFOs say they are biased toward revenue growth.


With monetary policy remaining accommodating across Europe, CFOs continue to view debt funding favorably. Bank borrowing again dominates the sources of funding for CFOs in Europe, with a net balance of 60%, on a GDP weighted basis, viewing bank borrowing as an attractive source of funding. Meanwhile in North America, 89% percent say debt is currently an attractive financing option (up from 80%), and 42% of public company CFOs view equity financing favorably (up from 30% last quarter).

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