North America's CFOs are bracing for a global economic downturn, with more than half saying they expect the US to be in recession by the end of 2020, according to Deloitte’s CFO Signals survey for the fourth quarter (Q4 2018). The report found that CFO expectations for the North American, European and Chinese economies are at their lowest levels in the past two years, with only 28 per cent expecting better conditions next year. However the majority of respondents believe the US economy is in good condition.

Sandy Cockrell III, national managing partner of Deloitte's US CFO Program said: “Despite strong economic performance over most of the last two years, more than half of CFOs surveyed now fear a recession by the end of 2020, however, a number of key economic indicators such as wage growth, employment rates, the value of the dollar, and consumer confidence remain strong and CFOs should take into account all variables as they set their 2019 plans into motion.”

The survey also noted that:

• Fewer North American CFOs said Europe's economy is in a good condition, compared to Q3, and only 7 per cent expect Europe to pick up in the coming year.
• Perceptions of China's economy also fell for the second straight quarter, with only 24 percent of CFOs saying current conditions are good. Just 12 percent expect better conditions for China’s economy in a year, compared to 27 percent last quarter.
• The Standard & Poor’s 500 experienced a four per cent decline since the Q3 2018 survey was released.
• Two per cent of CFOs said that debt attractiveness had declined for the fourth consecutive quarter, the lowest level in more than four years.
• Only 40 per cent of CFOs say this is a good time to be taking on greater risk – the lowest level in two years.
• CFOs cited growing worries about geopolitics, interest rates, and future economic growth but in Q4 2018, they also cited fresh worries around immigration and US-China relations.
• Recruiting/retaining talent and execution of strategy were the top internal risks that concerned CFOs, while they also expressed increased concerns about achieving growth and managing costs.
• CFOs’ expectations for sales, earnings and capital spending declined and are at or below their two-year averages.
• Their expectations for revenue growth declined from 6.1 percent to 5.5 percent, on par with the two-year average for this metric.
• Regarding expectations for the capital markets in 2019, CFOs anticipate substantially higher interest rates and 10-year bond yields to remain below 3.3 per cent.
• They also expect the US dollar to remain strong relative to other major currencies.
• They also anticipate little change in their debt, cash and buyback plans.
• CFOs voice even stronger concerns about legislative gridlock, following the US midterm elections that resulted in a split Congress.
• Few expect personal tax rates to change, but some express concerns about a possible repeal of corporate tax reform.
• About one-third of CFOs expect Congress to fund new infrastructure, but many worry about the impact of new spending and entitlements on the national debt (94 per cent expect it to rise).
• In addition, few CFOs expect progress on controlling health care costs, and they are split on whether the US regulatory environment will get better or worse for their industry.