Chief financial officers are more upbeat about the outlook for the North American economy than about their own companies’ prospects, according to Deloitte’s second-quarter CFO Signals survey.
More than half (59%) of the 101 CFOs from large North American companies responding to the survey described the North American economy as either good or very good, unchanged from last quarter. As a whole, the second-quarter survey saw the 10th straight quarter of “positive net optimism.”
However, the net optimism of 18.8% recorded in the second quarter was one of the lowest levels in two years, and down significantly from the first quarter’s rating of 34.4%. Moreover, the percentage of CFOs expressing rising optimism in their company’s prospects fell to 38%, from 48% in the first quarter.
Revenue growth expectations are down to 3.1%, resulting in the lowest level in the survey’s five-year history, from 5.4% in the first quarter. The energy/resources industry is a significant driver of lower expectations, with revenue forecasts falling to a contraction of 2.5%, from a contraction of 0.2% in the first quarter, but all industries experienced a decline in growth expectations.
Earnings growth expectations are at their lowest level in the history of the survey as well, dropping to 6.5%, from 10.6% in the first quarter.
While capital spending growth expectations rose slightly (to 5.4% from 5.2%), expectations of growth in domestic hiring fell to 1.2%, the lowest level since the first quarter of 2014.
“CFOs are less optimistic about their own companies this quarter, in part due to uncertainty around the condition and trajectory of the U.S. economy,” Sanford Cockrell 3rd, national managing partner, Deloitte LLP, and global leader of the Deloitte CFO Program, said in a press release. “The prospect of a pullback in the U.S. economy, possible interest rate increases, and high equity valuations are among the most worrisome risks for CFOs this quarter.”
The survey’s respondents were also concerned about risks associated with trade and financial exchange impacts of central banks’ monetary policies; rising commodity prices; the burden of government regulation; attracting and retaining finance talent; and crisis preparedness, with cyber-security attacks cited as the most threatening potential crisis.
Additional survey findings include: