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Mar 29, 2022

CFOs downgrade view of economic conditions amid swirl of risks, finds survey

Finance heads also more negative on own company’s financial outlook

CFOs have ‘dimmed’ their view of global economic conditions as they fret over rising inflation, geopolitical tensions and incoming regulation, according to new research by Deloitte.

The survey of finance chiefs at Fortune 500 companies finds that 64 percent believe the North American economy is good or very good now, down from 72 percent last quarter. Only 36 percent believe the US and Canadian economies will be better or much better in a year, a decline from 45 percent in Q4 2021.

Turning to Europe, respondents have further downgraded their assessment of economic conditions from an already low level.

The proportion of CFOs saying Europe’s economy is good or very good now stands at just 31 percent, down 2 percent. Meanwhile, the proportion of CFOs viewing Europe as better or much better in a year has dropped 14 percentage points to 26 percent.

Only 29 percent of CFOs say China’s economy is currently good or very good, although this stat shows no change from the previous quarter.

Worsening internal view

Highlighting the sense of uncertainty in the market, CFOs are also showing concern about their own company’s outlook.

Only 38 percent of respondents say they are ‘more optimistic’ about their business’ financial prospects compared with three months ago. This data point has been trending down each quarter over the last year.

CFOs name inflation, geopolitical instability and regulation as their main external concerns this quarter, while retaining talent is a significant internal worry, along with the prioritization of initiatives and executing strategy.

Despite the significant challenges facing companies, CFOs show a ‘notable’ increase in year-over-year growth expectations for revenue, reports Deloitte, as well as slightly higher expectations for dividends. But annual growth projections for earnings, capital spending, domestic hiring and salaries have all slipped from the previous quarter.

‘CFOs’ hesitation and drop in overall optimism for both the regional economies and their own company is indicative of the current business environment and the challenges they’re up against, including talent retention, geopolitical tensions, the looming threat of inflation and updates to federal policy and regulations that will affect their strategy,’ says Steve Gallucci, global and US leader of Deloitte’s CFO Program, in a statement.