2017 Q1 Global CFO Signals


2018 Q2 Global CFO Signals™

Twin worries: Trade and talent

In the eight surveys included in this quarterly round-up, many of the responding CFOs voice upbeat outlooks. But the threat of a trade war, and concerns over talent, have many CFOs on edge.

How does CFO sentiment in Q2 2018 break down?

A synopsis by region:

  • Australia: Solid on outlook; positive on risk
  • Belgium: Labor shortage risks restrain optimism
  • Brazil: Positive both on corporate and country outlooks
  • India: Optimism amid uncertainty and regulatory change
  • Japan: Trouble abroad exacerbates domestic concerns
  • North America: Strong optimism, but trade policy and geopolitics loom large


2018 Q2 Global CFO Signals™

Twin worries: Trade and talent

An abundance of positive economic evidence—from strong consumer demand to favorable monetary policy—helped sustain optimism among some CFOs in the second quarter of 2018. But two issues—trade and talent—seem to be sounding an ominous drum beat and sending mixed signals in the Q2 2018 edition of Global CFO Signals.

On the positive front, many of the CFOs in the eight surveys included in this quarterly round-up, voice upbeat outlooks about their organizations’ financial prospects, growth metrics, and, countries’ economic outlooks. In North America, for example, net optimism moderated from last quarter’s survey-high +54, but remains relatively strong at +39, and expectations for revenue, earnings, and hiring all rose. In Australia, 77 percent of CFOs are optimistic about their companies’ financial prospects—a sentiment that is reflected in local job growth and investment activity. And in India, 94 percent of CFOs are optimistic about that country’s outlook over the next two-to-three years.

But it is the threat of a trade war that has many CFOs on edge. In Australia, for example, more than 50 percent of CFOs believe a trade war will negatively impact their business in the short-term, whereas in the medium-term, this rises to 70 percent. Among Japanese CFOs, the threat of a global trade war easily topped their list of external concerns (93 percent). And while CFOs in the United Kingdom are understandably worried about the long-term effects of Brexit, they also rank “greater protectionism” as an escalating risk.

“The trade tensions between the US and China have continued to evolve,” observes Sitao Xu, chief economist, Deloitte China, “leading to many scenarios, some good, some bad.” He adds that businesses obviously do not want a protracted trade war, but often have little choice except to adopt a wait-and-see attitude—particularly when reevaluating supply chains. What is clear, however, is that “businesses are very worried about these tensions,” says Patricia Buckley, managing director, Economic Policy and Analysis, Deloitte Services LP (United States).

Compounding matters is the escalation of long-running concerns over talent. For Belgian CFOs, scarce labor is their greatest concern and has been since the second quarter of 2017. Japanese finance chiefs cite labor shortages at the top of their list of domestic concerns (67 percent), and US CFOs name talent as their top internal risk. Likewise, in the United Kingdom, which is feeling the effects of the lowest unemployment rate in 43 years, 44 percent of CFOs reported that recruitment difficulties or skills shortages have risen in the last three months.

Even more pressing is the fear is that these twin concerns—trade and talent—could have a chilling effect on business investment. Indeed, a report recently published by the European Investment Bank (EIB), states that the “limited availability of people with the right skills impedes the investment activity of more than 70 percent of European firms.”1 Going forward, says Michael Grampp, chief economist, Deloitte Switzerland, the shortfall means companies may need to rethink their workforce composition and competencies. “Companies realize they can’t just rely on the younger generations to fill the gaps,” he explains.

Whether these concerns are enough to dampen the current economic momentum, remains to be seen.  

CFO Sentiment 2017 Q1

2018 Q2 CFO sentiment synopsis by region


Amid trade tensions and skills shortages, CFOs in North America remained relatively optimistic about their companies’ prospects in the second quarter, with 48 percent expressing rising optimism (down from 60 percent in Q1), and 9 percent citing declining optimism (up from 6 percent). That optimism was bolstered by CFOs’ perceptions of both the US and Chinese economies: 94 percent of CFOs rated current conditions in the North American economy as good, a new survey high; and 55 percent rated the Chinese economy as good, up from 50 percent.

Additionally, despite recent volatility in US equity markets, CFOs were less likely to see markets as overvalued (63 percent; down from 76 percent in Q1 and well below the above-80 percent levels from late 2017). Meanwhile, in Brazil, the only South American country reporting (also for the first time), 62 percent of surveyed CFOs were optimistic about the country’s economy in the next year, and 75 percent are positive on their own companies’ performance over that time frame. CFOs in Brazil, however, are concerned about economicrecession (18 percent) and political uncertainty (14 percent).


In the Asia-Pacific region, outlooks vary. In Japan, for example, only 19 percent of surveyed CFOs indicated that they were “more optimistic” about their companies’ financial prospects, similar to last quarter. Their risks have shifted, however. While the prospect of labor shortages remains top on the domestic list of concerns, the combined restrictions on steel/aluminum along with the automobile tariffs have jumped from number five to two on that list. Meanwhile, in India, domestic policies—particularly the Goods and Services Tax (GST) law that went into effect in 2017—have had a positive effect on CFO outlooks.

The result? Some 64 percent of CFOs are optimistic about the economy in the next year, which is leading to a visible focus on growing revenues, investing in business, and promoting organic growth. Finally, in Australia, CFO sentiment strengthened markedly, bolstered by an improved labor market and investment conditions. Moreover, almost two-thirds (64 percent) of CFOs say now is a good time to take greater risk onto their balance sheets. And according to David Rumbens, partner, Deloitte Access Economics (Deloitte Australia), that commitment has a circular effect: “Business has the opportunity to drive this economy to the next level through a greater rate of investment, and that phase is now starting.”


Finally, in the three European countries reporting, domestic and international events colored CFOs outlooks. In the United Kingdom, for example, the Brexit overhang is only getting heavier. Three-quarters of CFOs, in fact, believe Brexit will lead to a deterioration in the business environment in the long-term. This sentiment is leading CFOs to place as much emphasis on defensive balance sheets as they did at the height of the euro crisis in 2012. Defensive strategies are also being embraced by Russian CFOs, who view protectionism and geopolitical risks as having the most negative impact on business.

In Belgium, however, CFOs gave positive marks to the government’s financial and economic policies, even though net optimism has fallen another 14-percentage points (now net +6). Still, the slowdown in optimism has not yet impacted investment and growth plans. More than 60 percent of Belgium’s CFOs still emphasize the implementation of expansionary strategies over defensive strategies, and a net 49 percent are planning to increase capital expenditure.

Despite the mixed survey results, Deloitte economists note that CFOs have plenty to be positive about, including lower taxes and additional government stimuli supporting demand, at least in the United States. But, says Buckley, “If the trade situation does not work its way out in a good way, that is definitely going to hamper growth.”

Global CFO Signals: By the numbers

Risk appetite

Risk appetites remain mostly strong this quarter. In India, for example, 57 percent of CFOs are willing to take greater business risks, as companies consolidate gains from recent reforms. In Australia, 42 percent of CFOs are interested in taking on risk in the form of additional investment, supported by stronger business conditions and the possibility of tax cuts. Meanwhile, risk appetite among Belgian CFOs has slowed, although it remains positive at 41 percent. In contrast, risk appetite in the United Kingdom remains well below its long-term average, as Brexit weighs heavily on investment decisions.


Financial, economic, and political uncertainty still worries many CFOs, but to varying degrees. In Belgium, 43 percent of CFOs rate the levels of financial and economic uncertainty as above normal, up from 39 percent last quarter. In Russia, 49 percent of respondents also point to high uncertainty around the current economic and political situations, up 13-percentage points year-over-year. However, in Japan, CFOs reporting “very high” or “high” uncertainty in the business environment fell sharply this quarter from 70 percent to 44 percent. In Australia, CFOs are still willing to take on balance sheet risk, despite the fact that uncertainty has climbed 10 percent since the last survey.


Many CFOs remain bullish on their prospects. In North America, expectations for revenue (6.3 percent, the highest in nearly four years) and earnings (10.3 percent, the highest level in three years) both rose again. Some 83 percent of India’s CFOs expect revenue growth, and 70 percent of Japan’s CFOs expect earnings to rise “somewhat” or “largely.” In the United Kingdom, however, revenue expectations have dipped, with a net 17 percent expecting increases, down from 31 percent last quarter. There, some 34 percent also expect Brexit to have a negative effect on capital spending over the next three years.


Labor and skills shortages are top of mind among CFOs. For CFOs in Belgium, scarce labor is their greatest concern and has been since the second quarter of 2017. Japanese executives express similar worries, citing labor shortages at the top of domestic concerns (67 percent). Similarly, in the United Kingdom, 44 percent of CFOs report that recruitment difficulties or skills shortages have increased in the last three months. Meanwhile, North American CFOs are in a hiring mode, citing hiring expectations of 3.2 percent, a new survey high. And in Russia, 73 percent of CFOs expect salaries to increase, a 15-percentage point increase from just six months ago.

Corporate strategy

Grow with what you know seems to be the theme. Over the next year, 74 percent of Brazil’s CFOs plan to focus on boosting revenue, with 66 percent targeting organic growth. CFOs in India are also focused on growing revenue and promoting organic growth. North American CFOs reached a survey high in bias toward organic growth (67 percent) over inorganic growth (17 percent); their bias toward current geographies over new ones also increased. But defensive strategies are again on the upswing in the United Kingdom, with 47 percent of CFOs focused on cutting costs.

Interest rates

CFOs have been bracing for interest rate hikes for a while now. This quarter, in Australia, 44 percent of CFOs expect interest rates to go up, while a full 90 percent of Belgium’s CFOs predict that interest rates will rise over the next 12 months. For UK CFOs, however, interest rate expectations have fallen back from the previous quarter, with 38 percent (down from 47 percent) of CFOs expecting the Bank of England’s base rate to be 1 percent or higher in a year’s time. About two-thirds of Russian CFOs, however, believe that the Bank of Russia's key interest rates will decrease.

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