2018 Q3 Global CFO Signals™

Has growth finally peaked?

In the 23 surveys reporting in this quarterly round-up, there appears to be an emerging sentiment that global growth may have peaked. As a result, CFO optimism has tumbled in several countries this quarter.

How does CFO sentiment in Q3 break down?

A synopsis by region:

  • Argentina: Continued concerns due to government actions
  • Austria: Risk of talent shortage accelerates automation
  • Belgium: Mixed business sentiment, yet investments remain strong
  • China: Trade tensions increase uncertainty
  • Denmark: Optimism makes space for digital transformation
  • Finland: Optimism waivers, but remains high
  • France: A drop in optimism and confidence
  • Germany: CFOs under pressure from skills shortages and indirect costs
  • Greece: Gaining confidence…
  • Iceland: Decreased economic and financial outlook
  • Ireland:  Slightly more cautious due to geopolitical risks
  • Italy: As uncertainty rises, optimism drops
  • Japan: Storms at home and abroad
  • Luxembourg: Keeping a cautious eye on growth
  • Middle EastIncreased oil prices=increased optimism?
  • Netherlands: Winter is coming
  • North America: Fading optimism, led by trade, tariffs, and talent concerns
  • Norway: Actions speak louder than words
  • Portugal: Hoping optimism could be sustained? Not so fast…
  • Sweden: Staying positive, just less so
  • Switzerland: Boom runs out of steam
  • Turkey: Currency woes, inflation, and interest rates weigh heavily
  • United Kingdom: Deal or no deal—that is the question


Has growth finally peaked?

For several quarters, many CFOs surveyed around the globe have reported growing optimism, reflected in solid revenue expectations, positive outlooks on regional economies, and expansionary company strategies. This quarter, however, their outlooks look very different.

In the 23 surveys reporting in this edition of Global CFO Signals, there appears to be an emerging sentiment that global growth may have peaked, thanks largely to geopolitical risks (think trade wars) and internal constraints (think talent shortages). As a result, CFO optimism has tumbled in several countries this quarter.

While many of the surveys were conducted before the recent equity market volatility, the warning signs seem clear. Take sentiment in North America, for example. There, net optimism slid to +36 from +39, reaching its lowest level since Q3 2017, despite the tailwind offered by recent tax reform. In Japan, net optimism dropped to -13 from -3 last quarter. The decline in China is even more dramatic: 82 percent of CFOs said they were less optimistic (versus 30 percent in Q1)—a sentiment fueled by the full weight of trade tensions between the United States and China.

Meanwhile, in several of the 18 European countries included in this report, CFO confidence in the financial prospects of their companies also took a hit. In fact, net optimism weighed in at +6 among the countries reporting, down sharply from +33 in the spring. And the declines are particularly pronounced in the United Kingdom (which is operating under the cloud of Brexit) and Turkey (where the economy is in distress, exacerbated by geopolitical disputes).

Aside from these country-specific concerns, though, CFOs again share two common issues: trade and talent. On the trade front, the escalating tensions between the United States and China has garnered the most attention. Not surprisingly, CFOs in both of those countries are laser focused on the issue, with finance chiefs in North America naming it as their main external concern, and 59 percent of China’s CFOs predicting that it will result in a reduction in trade volumes. CFOs in other countries have also taken notice: in Switzerland, for example, trade conflicts emerged as a top risk for the first time, and in Japan, it leads the list of external threats.

Trade is undoubtedly a global worry for CFOs, agrees Ira Kalish, chief global economist, Deloitte Global, pointing out that recent tariffs are “already disrupting global supply chains, and we’re seeing significant evidence that they may be having a chilling effect on business investment, not just here in the US.”

On top of this, it appears that talent challenges are also weighing on CFOs’ minds. In eight of the European countries surveyed, CFOs identified a shortage of skilled labor as a significant risk. Specifically, respondents noted that job applicants are significantly lacking in “appropriate technical knowledge” (40 percent), and “necessary work experience” (30 percent). Similarly, in North America, talent remains a constraint overall, and CFOs noted a particular need in finance for talent with analytical skills, digital technologies/automation, and core business skills.

Despite these overhangs, many CFOs expect to grow and to hire. In North America, CFOs continue to indicate a strong bias toward revenue growth over cost reduction (59 percent versus 20 percent). In 10 of the European countries reporting, CFOs included more expansionary strategies than defensive ones among their top approaches. Moreover, several European CFOs plan to hire, including Belgium, France, and Ireland.

“There may be a structural reason for this expansionary direction,” says Michela Coppola, who heads Deloitte’s European CFO Survey,  “namely the need to keep pace with technological change and disruption. This would explain CFOs’ focus on developing new products and services and on digitalization.” And it may explain the skill gaps they will need to fill.

How does CFO sentiment in Q3 break down?

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2018 Q3 CFO sentiment synopsis by region


In addition to optimism, many indicators in the North American report declined this quarter. For example, expectations fell for revenue growth (6.3 percent to 6.1 percent), earnings (10.3 percent to 8.1 percent), and capital investment (10.4 percent to 9.4 percent). In addition, perceptions of the North American economy declined, with 89 percent of CFOs rating current conditions as good (down from the survey high 94 percent last quarter), and 45 percent expecting better conditions in a year (down from 52 percent).

Meanwhile, in the one South American country reporting—Argentina—CFO outlooks are again fueled by government actions, particularly regarding inflation. And those actions seem not to have been highly regarded, as CFO net optimism plummeted to -51, from -16 in Q1 2018.


Outlooks have declined in the two countries reporting in Asia-Pacific—China and Japan—due to similar sources. Japanese CFOs, for example, are somewhat gloomy about their companies’ financial prospects, with only 12 percent reporting being more optimistic,” versus 19 percent in Q2 2018. And topping their external concerns are two related to their regional neighbor: the global trade war (87 percent) and China’s economic slowdown (81 percent). That neighbor is living those concerns, of course, and they are weighing heavily on CFOs’ outlooks. In fact, China’s CFOs named “increasing trade protectionism,” “further economic turmoil,” and “detrimental government policy/regulation” as their top three worrisome risks (together selected by 77 percent of respondents). 

Still, despite the fears, Sitao Xu, chief economist, Deloitte China suggests that there may be a long-term silver lining: “If you look at China’s economic reforms in the past 40 years, the catalyst has often been external pressures.”


Meanwhile, as reported here and in the latest European CFO Survey, companies across Europe have tempered their outlooks for their business prospects. That does not mean, however, that they are not riding the current environment as hard as they can. In fact, many CFOs remain willing to invest, with CFOs in Austria, Belgium, and Sweden particularly bullish on capital expenditures, and CFOs several countries poised to add substantially to their headcounts. Still, currency depreciation coupled with inflation makes Turkey one of two main outliers among the European countries.

The other continues to be the United Kingdom, where Brexit uncertainties are dampening expectations, and where 79 percent of British CFOs now expect Brexit to lead to a deterioration in the overall business environment. “CFOs have responded by pulling back on capital spending, by building up cash, by focusing on cost reduction,” says Ian Stewart, chief economist, Deloitte UK, adding that what happens in the Brexit deal, “will really form their views about growth over the next couple of years.”

Middle East

Finally, in the Middle East, where net optimism remains positive at +19, CFOs are concerned both about the economic outlook (34 percent) and geopolitical risks (20 percent). This quarter, however, risks related to oil prices emerged as a factor, whereas in previous years it was a nonstarter, particularly in the Gulf Union, the geographical source of the region’s production and reserves.

Other factors may take CFOs by surprise globally as we move into 2019. In addition to the overhangs of trade and talent, higher deficits and inflation in the United States, as well as additional increases in interest rates worldwide loom large. And then there is the simple fact, says Kalish, that “we’re now in the second longest recovery in US history, and recoveries don’t last forever.”

map of the world

Global CFO Signals: By the numbers

Risk appetite

Along with CFOs’ optimism, their risk appetite declined in several countries. In Europe, the biggest negative net balances were found in Turkey (-83), the United Kingdom (-77), and Iceland (-75). One exception was Greece, where the net balance increased by 12 percentage points. In North America, CFOs’ risk appetite decreased slightly, with 56 percent declaring it is a good time to take greater risk onto the balance sheet compared with 58 percent last quarter. In the Middle East, 79 percent of CFOs continue to be risk averse, slightly down from 83 percent last year.


Perceptions of uncertainty are inching higher. In Europe, many countries reported increased uncertainty, with net levels particularly high in the United Kingdom (+89), Germany (+86), and Turkey (+83). In Japan, there was a sharp increase in the percentage of CFOs who reported high uncertainty (67 percent compared with the previous quarter’s 44 percent). In the Middle East, the proportion of CFOs viewing uncertainty as high fell from 65 percent in 2017 to 60 percent this year, while those seeing it as average increased from 30 percent to 38 percent. 


In Europe, net expectations for revenue growth were particularly strong in Belgium and Sweden, whereas operating margin expectations fell markedly in Turkey and the United Kingdom. Meanwhile, growth expectations in North America declined for revenue (6.3 percent to 6.1 percent), earnings (10.3 percent to 8.1 percent), and capital investment (10.4 percent to 9.4 percent), but remained positive. In Japan, 69 percent of CFOs expect earnings growth, a number that has been stable recently. But in China, 38 percent of CFOs expect to miss planned revenue targets, and 33 percent expect to miss profitability growth targets by year-end.


Hiring agendas are mixed, despite tight labor markets. In China, for example, 32 percent of CFOs said they are leaning toward reducing their workforces, and 27 percent expect cuts in their finance departments. In North America, expectations for domestic personnel growth fell from 3.2 percent to 2.7 percent, even though talent remains one of the top worries among CFOs in the United States, Mexico, and Canada. Across Europe, though, hiring intentions have only slipped marginally from the spring, particularly in the euro area, where the unemployment rate is at its lowest level since 2008.

Corporate strategy

CFOs continue to eye expansion. Nine of the European countries reporting ranked organic growth as one of their top three strategic priorities for the next 12 months, four included new products/services in that list; while three (the Netherlands, Sweden, and Turkey) selected expansionary strategies in all three top slots. In North America, CFOs still favor revenue growth over cost reduction (59 percent versus 20 percent), although slightly less so than in Q2 2018. And in the Middle East, CFOs identified digitization as a top priority over both organic growth and new products/services.


CFOs continue to benefit from a favorable funding environment, but are braced for rising interest rates. Bank borrowing and internal financing are both seen as preferred sources of funding among European CFOs. In North America, debt financing remains attractive for 73 percent of CFOs, and the appeal of equity financing is on the rise at both public and private companies. Meanwhile, in the Middle East, almost half of CFOs said they will use existing cash or operating cash flows to fund any new projects they plan to undertake.

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To access previous Global CFO Signals reports, please visit the Global CFO Signals library page.

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