Bullish on the Economy, Bearish on Expectations

CFOs are optimistic about the U.S. economy under a Trump administration, but are unclear on how their companies will benefit, according to new data.
Sean AlloccaJanuary 9, 2017
Bullish on the Economy, Bearish on Expectations

CFOs have high hopes for the U.S. economy under President-elect Donald Trump, but aren’t exactly sure what the new administration’s proposed policy changes might mean for their companies’ bottom lines, according to a new survey by consulting firm Deloitte.

The CFO Signals survey polled 137 CFOs, beginning the day after Trump’s victory, and found optimism in the economy remained strong at 34%, up 18 percentage points from a quarter ago. Fifty-eight percent of the CFOs expect improvement to the U.S. economy in 2017.

CFOs project an uptick in the U.S. economy, banking on policies that promote a stronger dollar, a rise in interest rates and labor costs, and increased infrastructure spending, according to the survey.

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While CFOs think Trump’s policies could bolster the economy, they’re less confident about what that means for their own companies. Expectations for year-over-year revenue growth in 2017 dropped from 4.2% in the third quarter of 2016 to 3.7% last quarter, among the lowest marks the survey has recorded in six years. Respondents were equally as bearish concerning growth in capital investments, which dropped to the second-lowest mark ever. The projection for domestic growth in hiring fell below its two-year average.

“CFOs views about the changing economic environment are similar to those of economists,” said Danny Bachman, senior U.S. economist at Deloitte. “The unexpected results of the presidential election have introduced greater uncertainty about policy areas such as trade, infrastructure spending, taxes, and regulations — with an unusually wide range of possible impacts for business.”

CFOs’ expectations of Trump were in lockstep with much of the President-elect’s rhetoric on the campaign trail. Eighty-six percent of CFOs expect the Affordable Care Act to be significantly modified, and 53% foresee meaningful immigration reform legislation. Sixty-six percent of CFOs expect corporate taxes to decline, and 74% say repatriation of offshore cash to the U.S. will become more attractive.

“CFOs appear to be anticipating substantial changes in policy which will certainly affect their companies,” said Sandy Cockrell, a national managing partner at Deloitte. “As the new administration’s agenda unfolds and CFOs gain more clarity, it will be interesting to see how CFOs’ optimism and expectations change.”

As in past surveys, CFOs were particularly worried about a slowdown in the global economy and the impact of new government regulations. But the incoming presidential administration was a new addition to the survey’s risk factors this quarter. Specifically, CFOs are concerned about protectionism policies that might hurt global trade.

“Despite appearing to be fairly bullish on North America’s economy … there are concerns about [certain] topics, such as tax uncertainty and the possibility of a rising national debt,” Cockrell said.

All respondents to Deloitte’s fourth quarter CFO Signals survey are CFOs from the U.S. (82%), Canada, and Mexico, and the majority (84%) are from companies with more than $1 billion in annual revenue. The survey was conducted from Nov. 8 to 23, 2016.