Finance chiefs’ optimism remained relatively stable in the third quarter, but some “warning signs” are beginning to flash.
That’s according to the results of the latest quarterly CFO Survey conducted by Duke University’s Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta. The ongoing survey asks participants to rate their optimism about the overall U.S. economy on a scale from 0 to 100, and in the latest iteration, the average score came in at 60.3.
That was marginally down from 60.6 in the second quarter and 61.7 in the first. In a research summary, officials described CFO sentiments on the economy as “holding relatively steady.”
Indeed, in a year that saw the start of another U.S.-led war overseas and compounding fears of runaway technology, the Duke-Fed survey has shown steady CFO optimism in both the economy at large and their own business prospects. When asked to rate optimism about their own companies’ prospects on the same scale, the average response was 69.7 in the third quarter, down slightly from 70.7 in the prior quarter.
At the outset of the year, the average response was 70.2.
It bears noting that optimism wasn’t spread evenly among respondents. Optimism in the U.S. economy declined for CFOs of smaller firms, those with fewer than 500 employees, though it ticked up for finance chiefs at large companies, those with 500 or more workers. In addition, 20% of CFOs at smaller companies said financial constraints prevented them from making investments, compared to 11.9% of CFOs of larger companies.
“If one in five companies are affected, that does start to tug down on the economy,” said John Graham, finance professor and academic director of the survey, in a phone interview. “There’s a chunk of companies that are starting to feel some of the stress. They’re still hanging in there for now, but it’s not clear how much more they can take.”
On the pricing front, CFOs on average expected prices to grow 5.3% this year, and for unit cost to tick up 4.8%.
Graham said that survey responses so far this year have shown “moderate optimism” among CFOs. He pointed to the impact on smaller companies as one of the potential “warning signs” about the overall economic picture. “There may be a limit to how long this reasonable optimism and business plans continue,” he said.
Graham also pointed out that being financially constrained does not equate to being financially distressed.
Monetary policy, meanwhile, rose to the top of CFOs’ most pressing concerns in the third quarter, followed by inflation. The latest survey was conducted Aug. 17 to Sept. 4, just before the Federal Reserve raised interest rates last week. Researchers said results include responses from 517 CFOs.
The survey’s question about pressing concerns is an open-ended one, where CFOs can write in any responses they’d like. Despite increasing fears about self-improving artificial intelligence models dominating the headlines in recent days, AI did not make it onto any respondents’ list of pressing concerns. Graham said that may just mean the prospect of hostile, runaway AI tools is not yet a near-term concern for businesses.
“My interpretation is they’re focused on running their businesses over the next year,” he said. “I’m sure people have thought about these issues, but probably they assign a low probability of this happening over, say, the next year.”
