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Deloitte CFO Signals™ Survey
CFOs’ economic perceptions hit multi-year lows amid increasing global concerns
New York, September 19, 2019
- CFOs’ views on the trajectory of North America’s and Europe’s economies hit six-year lows.
- CFOs express even stronger concerns about the impact of U.S. trade policy on global growth, rising concerns about Brexit and the broader European economy, and the 2020 U.S. elections.
- For the first time in nearly seven years — since Q4 2012 — CFOs’ own-company optimism turned negative.
- About 45% of CFOs said they have experienced shareholder activism in the last three years, mostly via activists’ direct communication with management.
Why it matters to CFOs?
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.
Perceptions of the North American and European economies hit six-year lows
CFOs’ assessments of North America’s economy peaked in Q2 2018, with 94% 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% of respondents rating current conditions as good (down from 79% last quarter), and 15% expecting better conditions in a year (down from 24%). CFOs’ perceptions of Europe’s economy also declined, with 5% noting current conditions as good and only 2% expecting better conditions in a year. CFOs’ views of China’s current economic conditions decreased back to levels from Q1, with 20% indicating they are good (26% in Q2), and only 11% expecting better conditions in a year (10% in Q2).
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.
Own-company optimism hits a 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% of CFOs expressed rising optimism (down from 30%), while 31% cited declining optimism (up from 21%).
Several key metrics slide to multi-year lows
CFOs’ expectations for revenue growth rose from 3.8% to 4.3%; their expectations for earnings growth slid from 6.1% to 5.6% (a new survey low); their expectations for capital spending fell sharply from 7.7% to 3.6%; and their expectations for hiring dipped from 1.9% to 1.6% (both sit at three-year lows).
CFOs’ assessments of the North American economy’s trajectory hit a new survey low this quarter, with just 15% 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.
It is clear addressing activism appears to be a significant focus for CFOs. Nearly 80% of respondents cited at least yearly presentation of an ‘activists’ view’ to leaders, and 65% did so for assessing their company’s takeover attractiveness.
Most companies still provide quarterly earnings guidance, but some are taking different approaches
The vast majority of CFOs say they provide guidance in traditional ways involving quarterly estimates and underlying assumptions, but some are not providing guidance at all or are providing less extensive or less frequent guidance. Furthermore, most IR-related analysis and communication still occurs quarterly, even when earnings guidance does not.