The Economy

Happy, but Hesitant

The attitudes of U.S. CFOs are being influenced by such factors as high oil prices, the continuing fallout in the jobs market, and the upcoming Pre...
Joseph McCaffertySeptember 3, 2004

Not much has changed since last quarter’s CFO Global Confidence Survey. Finance executives are still fairly bullish on the economy, and they even expect that raises may be on the horizon.

The evidence on this latter point can be found in the top business concerns U.S. CFOs cite these days. Last quarter, finance executives were troubled by weakness in the local economy, but now the number-one business concern is attracting and retaining employees. And there’s plenty of angst that the job-retention issue could mean higher expenses in the form of higher salaries. In fact, a full 70 percent of respondents say they will increase spending on salaries, while 40 percent expect increases in bonuses.

That increased spending will likely mean pay raises (finally), since CFOs are still not doing a lot of new hiring. Forty-three percent say they will keep the same number of employees, and 11 percent say they will decrease that number.

CFO Insights on Inflation, Workforce Challenges, and Future Plans 

CFO Insights on Inflation, Workforce Challenges, and Future Plans 

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Otherwise, plans are on hold. In fact, 58 percent of respondents say they have no plans to conduct an acquisition, issue debt or equity, divest a business, conduct a stock buyback, or introduce a dividend payout in the next quarter.

Still, their economic outlook remains incredibly upbeat. Last quarter, 70 percent felt optimistic about the domestic economy; this quarter, 67 percent do. While the index was the lowest recorded this year, it was still within the margin of error, indicating that CFOs’ views on U.S. economic conditions have changed little during the course of the year.

Growth and profit expectations also haven’t changed much. The percentage of CFOs who expect revenues to increase during the next quarter, for instance, fell from 77 to 73 percent. As for profits, 66 percent of U.S. CFOs say they expect an increase in income during the next quarter, compared with 72 percent when the survey was last conducted.

In all likelihood, U.S. CFOs’ attitudes are being influenced by such factors as high oil prices and the upcoming Presidential election.

Globally, however, finance chiefs are more optimistic: more than half (52 percent) hold a positive attitude about the global economy, up from 44 percent last quarter.

Their European counterparts are more optimistic about their own economy than they’ve been in some time, with 55 percent holding a positive outlook, compared with 39 percent last quarter. That’s still gloomier, however, than the way in which their Asian and U.S. counterparts view their own economies. European CFOs are also more cheerful about the global economy: 65 percent expect improvement during the next year. And Asian CFOs are the most hopeful about their own prospects, with 83 percent predicting a positive economic environment for the next year.

One thing they have in common, however, is November 2. And just how positive everyone will be in the next survey will be determined in part by what happens that day in the U.S. elections.

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