CFO optimism rises with global economic growth

CFOs are generally optimistic about the global economy and their companies' prospects in 2018, according to CFO Signals, the latest quarterly North America CFO survey from Deloitte. The data showed that about 52 per cent of CFOs expressed rising optimism, while just five per cent cited declining optimism. In Q4 2017, three-quarters (74 per cent) of North American CFOs said that current economic conditions are good, compared with 64 per cent in the previous quarter. The CFOs surveyed were mainly from the US (86 per cent) but also from Mexico and Canada. CFOs' assessments of the European and Chinese economies showed marked improvement, with an increase in CFOs saying current conditions in Europe and China are good, compared to the previous quarter.

CFOs expect stronger economic performance in US

The survey highlights include:

  • CFOs overwhelmingly expect stronger economic performance in the US, and mostly expect improvement in Canada and Mexico.
  • Own-company optimism surged, largely on optimism in the US.
  • Expectations for earnings growth rose; those for revenue, capital spending, and domestic hiring fell, but remain relatively high.
  • A survey-high 84 per cent of CFOs say US equities are overvalued.
  • CFOs expect lower tax rates and changing US trade relations.
  • Data/analytics was the top trend CFOs say is affecting their strategies; convergence/disruption came in second.
  • Nearly 40% of CFOs say their company will take above-normal risks in pursuit of higher returns (up from 25% a year ago).
  • More than half of CFOs say their business models will have a substantial digital component.
  • Two-thirds of CFOs say securing/retaining talent will be difficult; more than half say they are substituting technology for labor.
  • CFOs’ most-cited planning roles are around providing insight and analysis, allocating capital, and challenging assumptions.

CFO views on Congress

The survey also looked at business planning and showed the following results:

  • 59 per cent agree or strongly agree that the US economy will improve in 2018, compared to around 38 per cent who think the Canadian economy will improve and 22 per cent who think the Mexican economy will improve.
  • 84 per cent of CFOs agree or strongly agree that labour costs will increase.
  • 55 per cent think consumer spending will be strong, while 64 per cent think business spending will be strong.
  • 70 per cent agree that the Federal Funds rate (currently 1.25 per cent) will remain at/below 2 per cent through 2018.
  • 67 per cent agree that the 10-year bond yield (currently about 2.3 per cent) will remain below 3 per cent through 2018.
  • The majority – 83 per cent – expect the 35 per cent corporate tax rate to be meaningfully lowered, and two-thirds expect Congress to pass a mandatory one-time tax on accumulated foreign profits (i.e., “deemed repatriation”).
  • A majority – 65 per cent – disagree or strongly disagree that the national debt will either decline or will increase at a slower rate.
  • Almost half – 48 per cent – do not expect Congress to make significant changes to the Affordable Care Act.
  • A majority – 58 per cent – don't expect Congress to take steps that slow inflation of healthcare costs.

Corporate taxes should be key focus in US

The survey also showed that CFOs are most keen for the US administration and Congress to focus on tax policies, as shown in the graphic below:

CTMfile take: Last quarter's CFO Signals survey - see link above - has a lot of detail that could be useful for financial professionals working in North America, particularly the sections on Business Planning for 2018.

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