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
  • Turkey: 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


Substantial improvements in equity markets and consumer confidence fueled a reversal in several of last quarter’s downward trends in North America. Year-over-year growth expectations improved across the board (yet most remain below survey averages), and net optimism came in strong at +30.0 (compared with +1.7 in Q1).

Concerns about oil prices and policy unknowns heading into the November election, however, translated into assessments of the North American economy that were only slightly better than last quarter’s survey lows. But CFOs’ confidence in Europe remains weak, given both concerns about Britain’s potential exit from the EU and other regional challenges. Meanwhile, assessments of China improved, but CFOs began voicing rising concerns about government debt there—and in other regions as well.


The two countries reporting in Asia-Pacific—Australia and Japan—documented very different CFO outlooks. In Australia, for example, better news from China and the associated stabilization of key commodity prices— however modest and fleeting—appear to be supporting an increase in confidence among CFOs. This was despite fears of Brexit and a knife-edge federal election result in that country. In Japan, though, CFOs remain wary despite the victory of the ruling coalition in the Upper House election when the survey was conducted. Their responses seem to indicate that most CFOs do not expect political stability will necessarily lead to improved economic growth. In fact, some 40% of CFOs reported decreased optimism, and 73% reported uncertainty as “high” or “very high.”


European results were affected by the fact that two countries (UK and Belgium) conducted their surveys after the Brexit vote, while the other three (Netherlands, Russia, and Switzerland) were surveyed prior. The impact on sentiment was particularly negative in the UK, where uncertainty is at levels last seen during the euro crisis of 2012. Risk appetite took a hit there too, as well as in Belgium, where just 23% of CFOs say now is a good time to take risk onto their balance sheet, down from 38% in the first quarter and 44% a year ago. Meanwhile, among Switzerland’s CFOs, there is some good news: for the first time since the end of 2014, a majority of CFOs rate the country’s economic prospects over the next 12 months as positive. The same cannot be said for Russia’s CFOs, who have their own concerns separate from Brexit, including weakness in the ruble, stress in the financial system, and dwindling consumer demand.

Sub-Saharan Africa

Similarly, among the regions reporting in the annual Sub-Saharan Africa survey, there are significant differences. South African CFOs are somewhat less optimistic about the performance of their companies in 2016, with 57% expecting a slight or significant improvement in performance compared with 61% in 2015. Elsewhere, there has been a drop in optimism among CFOs surveyed in Southern Africa, while CFOs in West Africa and East Africa have a somewhat more positive outlook for their companies in 2016. Many of their risk factors differ too, but currency volatility weighs heavily across the board. And those risks have a significant majority (84% in South Africa alone) of CFOs saying they will focus on improving operational efficiency and process optimization this year.

Such defensive stances may prove prudent. According to Deloitte’s economists, while Brexit’s fallout may seem contained, there may still be cause for concern.

As growth slows in Europe, adding to slow growth in China and Japan, it may cascade through other regions, says Buckley.

In other words, the hangover may linger.

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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 Turkey. 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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