CFOs continue to be optimistic about the economy’s outlook, even as concern grows about political uncertainty and talent shortages, according to the results of the second-quarter CFO Signals survey from Deloitte.
Sixty-three percent of surveyed CFOs say they are biased toward revenue growth, one of the highest levels in the survey’s history, and only 18 percent claim a bias toward cost reduction, for a survey-high net value of plus 45 percent. The bias toward investing cash over returning it to shareholders (62 percent versus 16 percent) hit another three-year high at a net plus 46 percent.
Nearly two-thirds (65 percent) of respondents said that economic conditions in North America are good, and 58 percent expect even better conditions in a year. Sentiment in Europe remained less positive even as optimism rose to a four-year high; only 17 percent of CFOs viewed Europe’s economy as good, but 30 percent expect conditions to improve over the next 12 months. In China, 28 percent of respondents say conditions are good, and 32 percent expect better conditions in a year.
All four business outlook metrics, tracked by the survey for 29 quarters, remain strong. Revenue growth expectations rose from 4.3 percent last quarter to 5.6 percent, above the prior two-year survey average. Earnings growth expectations rose to 8.7 percent from last quarter’s 7.3 percent, a two-year high.
Capital investment growth expectations fell to 9 percent this quarter from last quarter’s 10.5 percent, but still sit at their second-highest level in five years. Domestic hiring expectations held steady quarter-over-quarter at 2.1 percent. Net optimism declined from last quarter’s survey-high at plus 50 to plus 44 percentage points – the second-highest level in four years – with nearly 55 percent of CFOs expressing rising optimism and 11 percent citing declining optimism.
Because of expressed concerns about volatility and uncertainty, CFOs were asked about where they find information on macroeconomics, geopolitics, policy, financial markets, industry trends and management trends.
“CFOs have been citing volatility in the business environment as a growing challenge for several years now, and this quarter’s findings seem to show they are spending considerable effort staying abreast of what’s happening – across a very broad range of areas,” said Greg Dickinson, managing director, Deloitte LLP, who leads the North American CFO Signals survey. “Some appear to get significant help from internal and external resources who focus on particular areas, but it also appears they are doing a lot of research on their own.”
Major global news outlets are still CFOs’ primary sources of broad-based information, but there appears to be a rising reliance on subject matter specialists for deeper, industry-specific insight – especially consortia, professional services firms, bank analysts and individual thought leaders. CFOs focus mostly on their home country, China and Europe and mostly through their own research and briefings from external specialists. A few major publications are their go-to sources.
