CFO are now also more confident about the outlook for the economy and their businesses alike going into 2024. While talent continues to be a major issue for many companies and their finance teams, concerns around issues outside of the CFO’s control — e.g. monetary policy — are more pressing.
The results of the CFO Survey, conducted by Duke University and the Federal Reserve Banks of Richmond and Atlanta, revealed CFO confidence about the U.S. economy improved to 56.2 on a scale of one to 100, up nearly two points from last quarter’s survey. Growth expectations for GDP for the next year were upgraded to an average of 1.3% from 1% percent last quarter, and CFOs assigned a lower chance to negative GDP growth over the next 12 months.
CFO’s confidence in their own company’s performance also rose slightly to 67.8 from 67.2 a quarter ago, and the same from a year ago.
Conducted between August 21 and Sept. 8, the survey found 13.4% of all finance chiefs considered monetary policy their top concern, surpassing labor quality, which had held the top spot for several quarters.
According to Duke surveyors, monetary policy concerns are why some spending numbers are rising at a snail’s pace at U.S. companies.
“Monetary policy appears to be further dampening business spending and hiring plans,” John Graham, finance professor at Duke University’s Fuqua School of Business and the survey director, said in the report.
For example, finance executives lowered their projections for employee growth this year, forecasting a 1.1% increase, down from 6% in the second quarter.
2024 Expectations Positive
However, CFOs have a brighter outlook on 2024, suggesting “policymakers may yet pull off a soft landing for the U.S. economy,” said Graham.
Whether due to advances in product development, the prospect of being involved in an M&A transaction, or other elements that create growth expectations, finance leaders expect revenue growth to more than double in 2024, to 6.5%. They also expect to see hiring increase as much as 4%, on par with other forecasts.
Rate of Rising Prices Should Subside
At the same time, finance executives forecast prices and unit costs would slow their pace of increase in 2024. They project unit costs will slow to 5%, down from 5.7% last quarter, and price growth to slow to 4.3% next year, down from 5% last quarter.
The increase in wage bills, something CFOs have had to consider when navigating new policies around salary transparency, is also believed to be slightly slowing. Expectations around increases in wage costs dropped to 5.4% in 2024.
Despite the survey’s indication of monetary policy risk, and Graham’s observation on the impact it will have on spending, CFOs haven’t allowed their outlooks to impact their spending habits over the past three months.
According to the CFO Survey data, differentiating strategies around spending more, less, or the same were evident, but few companies made any drastic changes. More than a third (38.6%) of CFOs said they increased their spending somewhat in Q3, with just over a fifth (21.1%) stating they decreased it somewhat. Just under 3 in 10 ( 29.8%) said they made no change.