The Economy

U.S. Confidence Starts to Rebound

Finance executives are more optimistic about the domestic economy, but they expect a slow recovery.
Lauren MuskettSeptember 9, 2020
U.S. Confidence Starts to Rebound

In the second quarter of 2020, U.S. finance executives said they were more optimistic about the financial prospects of their companies and the direction of the U.S. economy compared with the first quarter, according to The CFO Survey.

The CFO Survey, a collaboration of Duke University’s Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta, asked respondents to rate their optimism for the financial prospects of their own firms on a scale of 0 to 100. The average optimism rating was 70, an improvement from the first quarter (60). The rating also came close to the average for the past several years (as measured by the survey’s predecessor, the Duke/CFO Global Business Outlook.)

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When finance executives were asked to rate their optimism about the overall U.S. economy using the same scale, the average rating was 60, an improvement from 51 in the first quarter.

Still, executives “continued to express concerns around the shape and strength of the recovery for their firms, their industries, and their customers,” said Brent Meyer, policy adviser and economist at the Federal Reserve Bank of Atlanta.

Respondents said their most pressing concerns were sales revenue and customers’ demand for their products. Survey respondents said they expected their companies’ revenues to decline 2% this year. But they predict 7% revenue growth in 2021.

Many of the executives surveyed said they expected their firms’ operating income, employment, and total compensation to bounce back in 2021 after shrinking in 2020. The pessimistic outlook for the current year was corroborated by respondents’ low expectations for gross domestic product growth, with almost 40% of firms expecting U.S. GDP growth to be negative for calendar year 2020. U.S. GDP fell at a 5% annual rate in the first quarter and a nearly 33% annualized in the second.

About one-third of the finance executives surveyed said they had cut headcount since March. Respondent firms reduced their workforces an average of nearly 6%. Most attributed the cuts to reduced demand due to the COVID-19 pandemic.

“Although some of these jobs will return by the end of the year, CFOs on average expect year-end 2020 employment to be 5% lower than it was at the beginning of the year,” said John Graham, a Fuqua finance professor. “By year-end 2021, employment is still expected to remain below pre-COVID levels.”


The survey found that about half of the respondent’s firms applied for new credit in the past six months. Thirty-three percent of respondents that applied for new credit said it was more difficult to access, while 11% said it was less difficult. The remaining participants said there was no change in their ability to obtain credit. Almost all of the firms that applied for credit received a loan amount at or near what they requested.

Almost all responding firms with less than 500 employees applied for funding from the U.S. Small Business Administration’s Paycheck Protection Program (PPP).

“PPP funding has been an important part of the survival mechanism that firms have employed,” said Sonya Ravindranath Waddell, an economist at the Federal Reserve Bank of Richmond. “The fact that almost all of the firms that reported taking PPP funding anticipate full forgiveness of the loan is one positive indicator for employment as policymakers try to anticipate the trajectory of the recovery.” (The loans are forgivable if the borrower devotes at least 60% of the proceeds to payroll costs. Borrowers also have to maintain the number of people on their payrolls.)