Q1 2019 Global CFO Signals™

Riding the tailwinds—for now

In the 21 surveys reporting in this quarterly round-up, we see that CFOs seem to have eyed any “good news” in this part of the economic cycle with caution.

How does CFO sentiment in Q1 break down?

A synopsis by region:

  • Austria: Going on the defensive
  • Belgium: Slowdown or recession?
  • China: Weighing in on disruption
  • Denmark: The great optimism is fading
  • Finland: Economic and geopolitical risks loom large
  • Germany: Business outlook dims; weighs on decisions
  • Greece: Most optimistic in Europe
  • Iceland: Seeing turbulence in the economy
  • Ireland: Increased capex and hiring expected
  • Italy: Expecting an economic downturn
  • Japan: Health of the neighborhood raises concerns
  • Luxembourg: An oasis of growth
  • Netherlands: Optimistic, but challenged
  • North America: Anticipating a slowdown (but not a recession)*
  • Norway: (Almost) no pessimists around
  • Portugal: Optimism cooling down
  • Spain: Prudence in the face of uncertainty
  • Sweden: Reversing course on optimism
  • Switzerland: Growth outlook: Switzerland still good
  • Turkey: Soaring interest rates and currency woes
  • United Kingdom: The dash for cash

CFO sentiment in Q1 2019

Riding the tailwinds—for now

In the first quarter, there seemed to be a string of good economic news—or, perhaps there was simply a lack of bad news. The equity market volatility at the end of 2018 subsided, and the markets roared back. There was an extension in the Brexit negotiations. The United States and China seemed to inch closer to a trade agreement. And the US Federal Reserve and European Central Bank slowed their tightening of monetary policy.

CFOs in the 21 surveys reporting in this edition of Global CFO Signals, however, seem to have eyed such “good news” with caution. After all, with the US expansion about to hit its 10-year anniversary and geopolitical risks, such as trade wars, and internal constraints, like talent shortages, still weighing heavily—conditions could turn sour quickly. Yet, the declining CFO optimism seen in many previous surveys seemed to press pause this quarter.

Take sentiment in North America, for example. There, net optimism rebounded from last quarter’s dismal +3 to +16 this quarter—better, but still the third-lowest reading in three years. In China, the outlook remains negative, but markedly less so, with net optimism rising to -35 in from -80 six months ago. And in many of the 18 European countries included in this report, CFOs’ confidence in their financial prospects remains substantially unchanged from the last survey six months ago—although that optimism is still decidedly muted.

Granted, there were still outliers. In Japan, for example, CFO optimism took another plunge over worries about a spillover effect from a slowdown in China. In Turkey, however, optimism rebounded substantially, and the proportion of CFOs viewing uncertainty as high amounted to half that of the previous survey. Meanwhile, in the United Kingdom, where Brexit continues to be an overhang, optimism moderated slightly given the number of respondents who reported “no change” in their outlooks—possibly a reflection of CFOs attempting to adapt to the high level of political uncertainty.

One of the highlights of this survey is the continuation of concerns similar to those that have plagued CFOs in previous editions—China’s economy, trade, and talent. CFOs in North America, for example, again named trade as their main external concern and cited US-China trade as their top policy area for change. In Japan, the China economic slowdown (88 percent) led the list of external threats. And in many of the European countries, skills shortages remained among their top three concerns.

Those concerns remain top-of-mind because they are so  critical to CFOs’ planning, says Patricia Buckley, managing director, Economic Policy and Analysis, Deloitte Services LP (United States), pointing out that the recent escalation in the trade war between the United States and China will put upward pressure on prices of imported goods and lower demand for exports in the bilateral trade between the two countries, thereby slowing growth. “This will only further cloud the outlook for business investment and, depending on the ultimate scope and length of time the tariffs are in place, we may see some retrenchment in other metrics, such as hiring,” she adds.

Any retrenchment may be exacerbated by a growing concern that the current economic tailwinds could turn to full-on headwinds. To take the pulse of how CFOs are viewing changing economic conditions, many of this quarter’s surveys asked about expectations for a downturn. The resounding answer was that a slowdown, and not a recession, may be on the horizon. In North America, for example, nearly three-fourths of CFOs said they expect a deceleration of economic activity by the end of 2020, while only 15 percent expect an extended decline. And across Europe, where Italy slipped into recession at the end of 2018 and Germany came close, most CFOs (except in Turkey, Italy, and Iceland) do not foresee a recession in the short term.

“CFOs in North America cited three main reasons for expecting a downturn: US trade policy, the length of business and credit cycles, and slowing growth in China and Europe,” says Greg Dickinson, managing director, Deloitte LP (United States), who leads the North American CFO Signals survey. In Europe, adds Michela Coppola, who heads Deloitte’s European CFO Survey, “local factors compounded outlooks, such as in Turkey and Italy, where current economic weakness led to predictions of a recession.”

Overall, however, it may well be “an unexpected event” that could trigger the next recession, says Buckley. But when (or if) a slowdown occurs, how long it lasts, and how deep it cuts remains to be seen, of course. In the meantime, here is a synopsis of CFO sentiment by region in Q1 2019.

Globe of Africa and Europe

Q1 2019 CFO sentiment synopsis by region


Flashing caution signs are very apparent in North America. Regarding their companies’ prospects in the first quarter, 32 percent of CFOs expressed rising optimism (up from 26 percent in Q4 2018), and 16 percent cited declining optimism (down from 23 percent). Their tepid optimism, however, is colored by declining assessments of the North American, European, and Chinese economies. In fact, since early 2018, perceptions of the North American economy’s trajectory have declined. And this quarter, just 28 percent of CFOs expect better conditions in a year—well off the 59 percent from Q1 2018. In keeping with that sentiment, CFOs’ expectations for revenue, earnings, and domestic hiring all declined and sit below their two-year averages.


Outlooks remain negative in the two countries reporting in Asia-Pacific—China and Japan—but to different degrees. In Japan, for example, only 6 percent of surveyed CFOs indicated that they were “more optimistic” about their companies’ financial prospects, down from 15 percent last quarter. But the number of pessimists jumped to 52 percent, from 38 percent in Q4 2018—driven by continued concern over the Chinese economic slowdown. Meanwhile, in China itself, the easing of trade tensions in the first quarter led to a significantly lower proportion (47 percent) of CFOs saying they were less optimistic, versus 82 percent in Q3 2018.


As reported in the latest European CFO Survey, European companies seem subdued about their outlooks for business prospects. But that does not mean that some aren’t still riding the tailwinds of the current environment. In Ireland, for example, 68 percent of CFOs expect to increase capital spending, and in Switzerland, 42 percent anticipate increased hiring. And in the United Kingdom, where 81 percent of respondents view Brexit as leading to a long-term deterioration of the economy, CFOs still list organic growth among their top strategic priorities. One promising piece of news? The Bank of England recently announced new growth data that is still positive, says Debapratim De, senior economist, Deloitte UK, adding that GDP growth in 2019 is now expected to be 1.5 percent—almost the same rate as last year.

There were other economic surprises in the past few weeks, both good—higher US GDP numbers for the first quarter, for example—and bad, such as the halt in trade talks. Despite the mixed news, CFOs in North America and in many European companies still view capital expenditures mostly positively, just less so. “To me," says Coppola, "That is what signals a slowdown and not a recession. But it also may signal a ‘new mediocre,’ as the IMF’s managing director Christine Lagarde once called period of disappointingly low growth.”

Globe of North and South America

Global CFO Signals: By the numbers

Risk appetite

In tandem with optimism, CFOs’ risk appetites continued to decline in several countries. In Europe, the biggest negative net balances were found in Turkey (-92 percent), Iceland (-85 percent), and the United Kingdom (-82 percent). The “bright” spots were Norway (-23 percent) and Ireland (-29 percent), but even there risk appetite was negative. In North America, CFOs’ risk appetite stabilized, with 41 percent declaring it is a good time to take greater risk onto the balance sheet—consistent with last quarter, but matching the lowest levels from the past four years.


Behind the retreats in optimism and risk appetite is an increase in uncertainty in many of the surveys. In Europe, net levels are particularly high in the United Kingdom (+94 percent), Germany (+91 percent), and Italy (+57 percent). In Turkey, however, the proportion of CFOs considering uncertainty high was half that of the previous survey, and the net balance dropped by 55 percentage points. In Japan, there was also a decrease in the percentage of CFOs who reported high uncertainty (56 percent) compared with the previous quarter’s (69 percent), reflecting the succession of somewhat good news throughout the first quarter.


In Europe, net expectations for revenue growth were particularly strong in the Netherlands (+73 percent) and Ireland (+71 percent), whereas operating margin expectations fell markedly in Finland (-68 percentage points) and Luxembourg (-30 percentage points) from last survey. Meanwhile, growth expectations in North America declined for revenue (5.5 percent to 4.8 percent), earnings (7.3 percent to 7.1 percent), and dividend growth (4.5 percent to 3.9 percent), the lowest level since Q4 2017. In Japan, 56 percent of CFOs expect “large” or “very large” earnings growth, up from 38 percent last quarter.


Labor markets may be tight, but CFOs are still prudent about who they hire. In North America, for example, expectations for domestic personnel growth fell from 3.2 percent to 2.1 percent, even though talent remains one of CFOs’ top internal risks. Across Europe, though, hiring intentions have slipped noticeably in the United Kingdom (net -60 percent) and Iceland (net -33 percent), whereas Ireland (net +45 percent) and Belgium (net +42 percent) remain bullish on adding headcount.

Corporate strategy

CFOs continue to eye expansion, even as they turn defensive. Eleven of the European countries reporting ranked organic growth as one of their top three strategic priorities for the next 12 months, while all but one selected a defensive strategy. In North America, CFOs still favor revenue growth over cost reduction (51 percent versus 25 percent), although slightly less so than in Q4 2018. And in China, 37 percent of respondents categorize themselves as actively looking to be disruptive, while 51 percent say they are going to be reactive to changes in the market.


In an environment of paused tightening of monetary policy, both bank borrowing and internal financing are seen as preferred sources of funding among European CFOs, although slightly less so than last survey. In addition, the European CFOs see the impact of an “untimely tightening of monetary policy” as a medium probability with modest impact. In North America, debt financing remains attractive for 70 percent of CFOs (up from 62 percent), but the appeal of equity financing fell for both public and private companies.

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

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