Talk of a tech-driven apocalypse. Dozens of armed conflicts around the globe. Continued concerns about everyday affordability. None of these things, apparently, have been enough to seriously dent CFO optimism, if findings from a spate of recent surveys are any indication.
A survey of 1,000 U.S. senior finance leaders conducted by U.S. Bank and released Tuesday, for instance, revealed that 68% of respondents have a positive three-year outlook on the U.S. economy. That’s up from 58% in the bank’s same survey in spring.
The findings of U.S. Bank’s CFO Insights Report even came as something of a surprise to Stephen Philipson, the bank’s vice chairman and head of wealth, corporate, commercial and institutional banking. “I would have thought that maybe best case we'd be kind of flat (compared to) the sentiment in the spring, but it's actually better,” Philipson said in an interview discussing the latest findings.
“We all watch the headlines. We watch the volatility in the market, but it seems what's happening on the ground —we hear this from clients — is the economy remains incredibly resilient, whether it's the consumer side or the wholesale side,” he continued.
The U.S. Bank data, which was collected between Aug. 5 and 26, tracks with other recent surveys, such as Deloitte’s quarterly CFO Signals report released Monday. On a scale of one to 10, Deloitte put CFO confidence at 6.1 in its third-quarter report, up from 5.9 in the prior quarter. Though the latest figure was down slightly from 6.3 in the first quarter of the year, Deloitte put both rankings in the “high” category.
In addition, over a third of respondents in Deloitte’s survey (37.5%) described the North American economy as “good now,” and nearly half (46.5%) described it as “better in a year.” Deloitte officials said that sentiments on the North American economy “remained broadly stable, while Europe weakened.”
The Deloitte report also detected “sustained optimism about future financial performance,” with 90% of respondents saying they’re “more optimistic” about their own company’s financial prospects compared to the last three months.
And even as leaders of leading artificial intelligence labs in America sound the alarm about the nascent technology’s potential harms, CFOs don’t seem to have the same fears. In fact, per U.S. Bank’s research, fewer finance chiefs are expressing concern about it. In the latest iteration of U.S. Bank’s CFO Insights Report, only about a quarter of respondents (24%) cited the “pace of technology change and digital disruption” as a top three concern.
While that’s up marginally from 21% in the spring survey, it’s down from earlier surveys, when the number hovered around 40%. Philipson chalks that up to increasing adoption among CFOs, ultimately leading to more comfort with the technology.
Tolerance for risk
Both surveys seemed to indicate a greater level of risk appetite among finance leaders. Deloitte’s survey, for example, showed that just over half of respondents (53%) said that now is a good time to take on more risk, down from 59% in the prior quarter.
Meanwhile, U.S. Bank’s survey takers showed an apparent appetite for M&A, with 57% of those respondents saying their business was more likely to make acquisitions over the next 12 months than it did in the prior year, up from 49% in the spring survey. Evaluating potential M&A, divestiture and partnerships also rose to the third-highest priority for respondents, up from fifth-highest in spring.
Many respondents in U.S. Bank’s research are still seeing opportunity even amid global uncertainty. While “geopolitical tension and war” were the top concern for respondents, 71% also agreed that “geopolitical uncertainty created opportunities as well as risks for their businesses."
How so? “Volatility could push down valuations in some industries, which could create buying opportunities,” explained Philipson. Some respondents “who plan to be more front-footed could see competitors pull back or delay investments, and they see opportunities there, he added.
But, as another recent CFO survey conducted by Duke University and two regional Federal Reserve banks found, there may be limits to CFO optimism. Philipson said that he’s continuing to watch core inflation and interest rates, for one. Rising inflation in the face of growing interest rates, he said, could lead to a “breakdown in that resilience, which could create a flywheel of effects.”
