CFOs’ optimism about the economy remains low

Less than half of finance leaders in North America rate current economic conditions as “good or very good,” according to a recent survey, and more CFOs are negative about the coming 12 months.

Deloitte’s 4Q23 North American CFO Signals survey found that 47% of CFOs feel good about the economic conditions, possibly because of high interest rates and the impact of geopolitical events. Only 37% expect conditions to improve over the next year, down from 46% in the third quarter of 2023 who expected improvement.

The survey was conducted in November from 124 CFOs, mainly from companies with more than $1 billion in annual revenue; 90% of respondents are from the United States, 8% from Canada, and 2% from Mexico.

CFOs were just as negative regarding the financial prospects of their own companies. About 27% of finance leaders were more pessimistic about their own company, up from 19% last quarter.

According to the survey, “CFOs may also be concerned that while inflation has cooled significantly from its peak, it remains above the Federal Reserve’s target of 2% — perhaps suggesting that the anticipated soft landing may not be entirely smooth.”

The most cited reasons for the negative outlook over the next year were inflation, interest rates, and liquidity impact by about 70% of respondents, followed by macroeconomics (49%) and geopolitics (40%).

Debt and equity financing is seen as less attractive than in last quarter’s survey, possibly because of high interest rates and less available credit. Only 10% of CFOs find debt financing attractive, down from 16%. Only 19% find equity financing attractive, down from 29%.

Other findings in the survey:

  • CFOs said their top priorities for this year will be financial performance (53%), growth (43%), cost management (36%), and capital allocation (34%). Strategy setting and execution (24%) and cash management (21%) were also named as priorities.
  • More than three-quarters of CFOs said cybersecurity will be a top-three priority for the audit committee over the next 12 months, well ahead of enterprise risk management (43%), finance and internal audit (40%), and compliance with laws and regulations (38%). Finance transformation, artificial intelligence, and environmental, social, and governance reporting were also cited.
  • Regarding company strategy and growth, more than three-quarters of CFOs said digital transformation and technologies will play a bigger role in 2024. Half of finance leaders expect their companies to raise prices for a substantial portion of their products/services to offset inflation. Almost half said they will increase their focus on new markets inside North America, compared with 30% indicating their focus will be on new markets outside the region.

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