U.S. CFO optimism has dropped to a new low due to the widespread and sudden effects of the coronavirus pandemic, according to the Duke University/CFO Global Business Outlook survey.

In the second half of March, the CFO optimism index fell to 42 (on a scale from 0 to 100), which reflects that CFO sentiment is as bleak as it was during the 2008 Great Recession.

“The optimism index was at 58 in the first half of March before plummeting to the low 40s in the second half of the month,” said John Graham, a finance professor at Duke University’s Fuqua School of Business. “The index has proven to be a good predictor of future GDP and unemployment, anticipating that the economy will perform as poorly in 2020 as it did during the Great Recession.”

Such a large optimism index drop indicates that CFOs didn’t anticipate the large and sudden effects the coronavirus pandemic would have on business prospects.

Before March 15, surveyed U.S. businesses said they planned to increase payrolls by more than 4% and increase spending by nearly 5% over the next 12 months. But after March 15, they switched course for the coming year and said they now planned to reduce employment by 1.2% and reduce spending by 1.4%.

“We have already seen a bigger jump in unemployment in the past three weeks than during the entire Great Recession, so there is good reason why optimism has fallen,” said Fuqua finance professor Campbell Harvey. “CFOs are fighting their own war for the survival of their companies.”

When CFOs were asked to report two forecasts of sales revenue — one being the best estimate for revenue in the coming year and the second being revenue under very bad conditions — they predicted a 4% increase in the next year as the best estimate and a 13.3% decrease under very bad conditions.

“Things could get worse,” Graham said. “Even with the pessimism expressed during the second half of March, only about one-third of U.S. firms believed that they faced large financial risk due to COVID-19, while about half said they faced medium risk. Should more companies realize that they in fact face large financial risk due to the virus, hiring and spending numbers will get even worse.”

The Duke University/CFO Global Business Outlook survey was conducted over six weeks from February 25 through April 3. The results document the weekly impact of COVID-19 on businesses around the world.

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