Q4 2018 Global CFO Signals™

Uncertainty returns with a vengeance

In the seven surveys reporting in this quarterly round-up, we gain insight into the concerns facing many CFOs as they headed into the new year.

How does CFO sentiment in Q4 break down?

A synopsis by region:

  • Australia: It’s now a glass half empty
  • Belgium: Fasten seatbelts
  • Central Europe: Outlook optimistic, but is confidence past its peak?
  • Japan: Global economic environment causes concern
  • North America: Tariff and gridlock expectations stoke recession fears
  • Russia: Worries over demand and stagnation suppress optimism
  • United Kingdom: Cost is king

CFO sentiment Q4 2018

Uncertainty returns with a vengeance

As they closed out 2018, CFOs around the world were greeted by two old “friends”: uncertainty and ambiguity. And that double whammy resulted in mixed—and increasingly downward—trends in the Q4 2018 edition of Global CFO Signals.

Just consider some of the overhangs many of the CFOs in the seven surveys included in this round-up (representing the views of finance chiefs in 25 countries) faced as they headed into the new year:

  • For UK CFOs, the uncertainty caused by the nonresolution of Brexit drove a marked shift toward defensive balance sheet strategies;
  • In North America, lack of clarity over US trade policy and what a split Congress means for the long term, sent CFO net optimism falling from +36 to just +3;
  • Meanwhile, in Australia, the same US-China trade tensions along with a weaker global and domestic outlook led 42 percent of CFO respondents to factor a global economic slowdown into their strategic planning.

Add in equity market volatility, the continued spread of protectionist policies, and the ongoing slowdown of the Chinese economy, and it is little wonder that many CFOs voiced declining outlooks. In Belgium, for example, all the key indicators turned red, with optimism reaching its lowest level since 2013. In Russia, the fear of economic stagnation, among others, drove net optimism from +27 six months ago to -6. And even in Central Europe, where optimism remains mostly positive across the 17 countries reporting, expectations for the region’s businesses and economies have slightly declined, which may be an early indication that sentiment is set to change.

“CFOs have been facing a cacophony of global question marks lately,” says Greg Dickinson, managing director, Deloitte LP (US), who leads the North American CFO Signals™ report, noting that “this quarter, you can add demand to the list.” In fact, in the Q4 survey, he says, while about half of CFOs expect strong consumer spending in 2019 (similar to last year), just 32 percent expect strong business spending (about half of last year’s level).

Together, the above factors have amplified perceptions of uncertainty. In Australia, for example, net uncertainty has been steadily rising since the end of 2017, when just 50 percent of survey respondents rated the general level of external financial and economic uncertainty above normal. That figure has risen to 66 percent in the final half of 2018. Among Belgian CFOs, 53 percent now rate uncertainty as high, up from 25 percent last quarter. And in the United Kingdom, the understandable worries about the fate of the Brexit deal, led 58 percent of CFOs to rank uncertainty as high or very high—the highest reading since mid-2016.

Of course, CFOs are no strangers to uncertainty. The global financial crisis and the European debt crisis are just two examples of times when they managed through volatile environments. What’s different this time, says Michela Coppola, who leads Deloitte’s European CFO Survey, is that “companies are not sure countries will always work together on issues.” Agrees Patricia Buckley, managing director, Economic Policy and Analysis, Deloitte Services LP (US), “Previously, parties could have been counted on to cooperate on issues if global growth depended on it. Now countries are behaving in a much more parochial manner.”

How all these factors may impact global growth remains to be seen. In the meantime, here is a synopsis of CFO sentiment by region in Q4 2018.

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2018 Q4 CFO sentiment synopsis by region


Amid continued trade tensions and political wrangling, CFOs in North America remained positive, albeit less so. Regarding their companies’ prospects in the fourth quarter, 26 percent expressed rising optimism (down from 48 percent in Q3 2018), and 23 percent cited declining optimism (up from 12 percent). Still the caution signs are clear.

For example, the proportion of CFOs expecting the North American economy to be better in a year fell to just 28 percent, continuing quarterly declines from a high of 59 percent in Q1 2018. Assessments of the Chinese and European economies also fell. In addition, just 27 percent of CFOs expect the US economy to improve in 2019 (half the level going into 2018), while only 22 percent expect the Canadian economy to improve in 2019, and only 18 percent say the same for Mexico. Compounding matters, says Dickinson, “CFOs are voicing very strong doubts about Washington’s ability to make good, timely legislative decisions—especially in response to a major economic downturn.”


In the Asia-Pacific region, caution also reigned. In Japan, for example, only 15 percent of surveyed CFOs indicated that they were “more optimistic” about their companies’ financial prospects, slightly up from 12 percent last quarter. But the number of pessimists jumped from 25 percent in Q3 2018 to 38 percent now. CFOs also reported dampened expectations for earnings and operating profits, mostly driven by fears associated with the economic slowdown in China and other global risks.

Meanwhile, in Australia, the number of CFOs feeling less optimistic about the financial prospects of their companies now outnumber those who feel more optimistic. That is the weakest result since the end of 2011, with net optimism regarding change in financial prospects falling to -8 from +29 in the first half of 2018. “The fall in optimism comes at a time when CFOs are concerned that the global environment is hurting their business prospects,” says David Rumbens, partner, Deloitte Access Economics (Deloitte Australia). “And given that weaker optimism, it is unsurprising that the majority of CFOs believe now is not a good time to be taking on risk.”


Finally, in the European countries reporting, events at home and abroad are fueling retrenchment. In the United Kingdom, for example, 78 percent of CFOs believe Brexit will lead to a deterioration in the business environment. This sentiment is leading CFOs to emphasize defensive strategies, with cost reduction as their top priority and increasing cash flow not far behind. Says Debapratim De, senior economist, Deloitte UK, “CFOs seem to be preparing for the worst. They have a sharper focus on cost reduction now than at any time since we started asking them about their preferred strategies—nine years ago.”

Meanwhile in Russia, concerns about stagnation are joined by weaker domestic demand and the weakening of the ruble on CFOs’ list of top risks. Their response? Continuous cost control and cost cutting are their top two near-term strategies. In Belgium, cost control and efficiency also moved up on the list of CFOs’ business priorities (although organic growth still holds the top spot). And across Central Europe, where 35 percent of CFOs consider the level of uncertainty to be high and increasing costs are seen as a significant threat to businesses, finance chiefs are looking to manage operating expenses and restructure as their top strategic priorities moving into 2019.

Deloitte economists note that some of the current uncertainty will resolve itself in the near-term. For example, there will either be a Brexit deal—or there won’t. The current trade truce between the United States and China is set to conclude in March. And the much-anticipated European Parliament elections have been set for late May. In this environment, says Coppola, “CFOs seem to be in a ‘wait and see’ mode, but one way or the other much of this may be resolved in the second half of the year.”

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Global CFO Signals: By the numbers

Risk appetite

Risk appetites have, for the most part, retreated this quarter. In line with greater uncertainty and weaker optimism, 53 percent of Australian CFOs say now is not a good time to take greater risk onto the balance sheet. In Central Europe, an average of 73 percent agree with that assessment, with finance chiefs in the Eurozone even more risk adverse at 77 percent. Meanwhile, risk appetite among Belgian CFOs has slowed (21 percent, down from almost 40 percent). And in the United Kingdom, risk appetite has dropped to its lowest level in more than nine years, as Brexit weighs heavily on investment decisions.


Uncertainty comes in many forms—financial, economic, and political. Yet, all seem to be complicating CFOs’ lives this quarter. In Belgium, 53 percent of CFOs rate the levels of uncertainty as above normal, up from 25 percent last quarter. In Russia, 67 percent of respondents also point to high uncertainty around the current economic and political situations, up from 49 percent six months ago. Similarly, in Japan, 69 percent of CFOs report a high level of uncertainty, up from 67 percent in Q3. Meanwhile, in Australia, net uncertainty has been steadily rising since the end of 2017, and sits at 66 percent in the final half of 2018.


Business prospects are being negatively affected by uncertainty. In North America, expectations for sales, earnings, and capital spending declined and are at or below their two-year averages this quarter. In the United Kingdom, revenue expectations have dropped to their lowest level since the summer of 2016 and the outlooks for both capital spending and discretionary spending are at their lowest levels in more than two years. Japanese CFOs are also lowering their expectations for earnings and operating profit. Meanwhile, across Central Europe, most CFOs believe that revenues will be higher in 2019 (66 percent), but the share that holds this view has decreased since last year by seven percentage points.


Shortages of skilled labor remain a top concern among CFOs worldwide. For CFOs in Belgium, scarce labor ranks as a top concern, with 82% reporting they are at least somewhat worried about their ability to attract and retain the talent they need. Similarly, in the United Kingdom, 42 percent of CFOs report that recruitment difficulties or skills shortages have increased in the last three months. Meanwhile North American CFOs remain in a hiring mode, citing hiring expectations of 3.2 percent, up from 2.7 percent. And in Russia, where more than half of CFOs expect their workforces to remain unchanged, 63 percent expect salaries to increase.

Corporate strategy

Strategies are mixed this quarter, with playing defense a strong priority. North American CFOs, for example, indicate a smaller bias toward growth over cost reduction (50 percent vs. 21 percent) this quarter and a lower bias toward investing cash over returning it (48 percent vs. 18 percent). But defensive strategies have a firm footing in the United Kingdom, with 56 percent of CFOs focused on cutting costs—the highest in nine years—and 47 percent reporting that increasing cash flow is a top priority. Across Central Europe, CFOs are looking to manage increasing operating expenses and restructuring as top strategies going into 2019. Still, despite declining optimism, CFOs in Belgium cite organic growth and digitization as two main business priorities.


What’s in store for interest rates in 2019? In Australia, 95 percent of CFOs expect rates to stay the same or go up, while 41 percent of Russian CFOs believe the Bank of Russia’s key interest rate will increase. Across North America, 58 percent of CFOs expect the US federal funds rate to rise above 2.5 percent during 2019. For UK CFOs, however, interest rate expectations have fallen back from the previous quarter, with 58 percent (down from 84 percent) of respondents expecting the Bank of England’s base rate to be 1 percent or higher in a year’s time.

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

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