Although regulatory developments, risk management, and digital acceleration are just as important as they were last year to CFOs, labor quality and monetary policy continue to be the top concerns of finance leaders.
According to fourth-quarter data from Duke University Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta, monetary policy and labor quality were equally concerning for CFO respondents, each getting a 12.5% share of mentions. Fewer CFOs chose cost pressures and inflation as their top concern, dropping it to third-most-mentioned.
Higher CFO Optimism
However, CFOs are going into next year more optimistic about economic prospects than last quarter. On a scale of 100, the index for CFO optimism about the overall economy rose to 58, up from 56.2 from last quarter. Finance chiefs’ optimism about their own firm’s prospects remained higher than economic optimism, at 67.3, but that was down slightly from 67.8 in the third quarter.
Given 2023’s tightening of monetary policy and subsequent banking collapses, combined with geopolitical turmoil, an increasingly positive outlook on 2024 hints that finance leaders are confident in the strength of the global economy and their companies’ ability to achieve some sort of growth amid much uncertainty.
Revenue and Growth Projections
CFOs’ growth expectations for 2024 remained consistent. CFOs project price growth of 4.1% on average next year, nearly flat with the third quarter, and unit cost growth of 4.7%, down slightly. Average expected employment growth for 2024 fell to 3.3%, but the median rose to 2.7%. The average projection for revenue growth was 6%, down from 6.7% in the third quarter.
The CFO’s willingness to spend, a must when maximizing labor and leveraging technology, is keeping somewhat steady, but there is evidence some companies could be cutting back.
Fewer CFOs reported spending more over the last three months. Over a third (33.8%) said their spending increased somewhat, down from 38.1% in the third quarter. A greater number (28.3%) reported no change in spending or somewhat decreased spending (23%).
The Continued Impact of Pandemic Lockdowns
The COVID-19 lockdowns continue to have a dampening effect on business outlook. According to The CFO Survey researchers, nearly six in 10 (58.4%) of respondents said they expected price growth would remain higher because of the lingering effects of the pandemic.
Nearly three in 10 (29.7%) said they expected their annual revenue growth in 2024 to be lower compared with pre-pandemic norms, with nearly one in 10 (8.6%) saying they expect it to be significantly lower.
The Duke-Fed CFO Survey was fielded from November 14 to December 1 and garnered responses from up to 439 U.S. firms.