The Economy

Next Year Looks Better, Say CFOs

Latest CFO Global Confidence Survey shows finance chiefs upbeat about prospects in 2003.
Joseph McCaffertyDecember 1, 2002

The U.S. economy is once again poised to take a run at a recovery, say CFOs, but concerns about future prospects at home and abroad linger. Certainly turmoil at the Securities and Exchange Commission has done little to allay those concerns. But the hope that the wave of big accounting scandals is ebbing is clearly reflected in CFOs’ cautious optimism about the future. After the outlook dampened last quarter, finance executives are once again more hopeful that economic conditions are improving.

According to our quarterly Global Confidence Survey, 30 percent of U.S. respondents say their attitude toward the domestic economy in the next year is either “confident” or “very optimistic,” up from 24 percent last quarter. But worries about the economy persist. Nearly 44 percent of U.S. respondents are “concerned” about the economy in the next year, and another 6 percent are “very pessimistic.” Still, those numbers are down from last quarter, when 58 percent of respondents held negative outlooks.

CFOs are also increasingly upbeat about the state of the economy over the long haul. A full 88 percent of respondents hold positive views about the U.S. economy in the next five years, up from 77 percent last quarter. And fewer are pessimistic–only 3 percent of the CFOs polled said they had a negative view of the long-term U.S. economic picture, down from 12 percent last quarter (9 percent were neutral).

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Views of the global economy by CFOs around the world are more mixed. Half of the respondents, including finance chiefs in Europe and Asia, say they are concerned about the global economy over the next year. Those concerns fade over the long term, with only 6 percent of CFOs in those regions reporting negative views of the global economy over the next five years. If anything stands out on the global front, it’s that European CFOs are more worried about their own economy and the global economy than are their counterparts in the United States or Asia. A stout 65 percent were “concerned” about the European economy in the next year, and another 4 percent were “very pessimistic.”

As for when conditions in the United States might improve, respondents are split. The largest group, 40 percent, don’t expect a broad economic recovery to begin until the second half of 2003. Others are more hopeful: almost 30 percent are looking for a rebound in the first half of next year. Indeed, 13 percent believe that a broad economic recovery was already under way when the survey was conducted in late October.

The possibility of a war with Iraq is to blame for some of the anxieties of finance executives. Forty-four percent of the respondents believe a war would have a “slightly negative” impact, and another 11 percent say it would have a “very negative impact.” Still, a majority–71 percent–approve of President Bush’s intentions to pursue a regime change in Iraq.

CFO Global Confidence Survey Results

Attitudes of U.S. CFOs toward the domestic economy:
  One Year 5 Years
Very optimistic 3% 28%
Confident 27% 60%
Neutral 20% 9%
Concerned 44% 2%
Very pessimistic 6% 1%
Attitudes of U.S. CFOs toward the global economy:
  One Year 5 Years
Very optimistic n/a 9%
Confident 16% 59%
Neutral 33% 27%
Concerned 43% 5%
Very pessimistic 8% n/a
Attitudes of European CFOs toward the global economy:
  One Year 5 Years
Very optimistic n/a n/a
Confident 6% 65%
Neutral 27% 25%
Concerned 61% 6%
Very pessimistic 6% 4%
Attitudes of Asian CFOs toward the global economy:
  One Year 5 Years
Very optimistic n/a 15%
Confident 17% 51%
Neutral 26% 28%
Concerned 53% 4%
Very pessimistic 4% 2%

Based on responses from 214 CFOs in the United States, Europe and Asia

Back in black: 29% of CFOs who resonded to our Global Confidence Survey say profits will increase by more than 5% next quarter.