Less Than Half of CFOs Are Optimistic About the Economy

Nearly three-fourths of CFOs expect the Fed’s interest rate hikes to lead to recession. Moreover, only about 40 percent have a positive outlook about the U.S. economy over the next six months, compared with nearly 70 percent a year ago, a new survey from Grant Thornton finds.

The top five reasons for this pessimism are:

• Increasing costs for goods and services (cited by 73 percent of respondents)
• Increasing energy costs (71 percent)
• Supply-chain challenges (66 percent)
• Interest rate increases (64 percent)
• Increased cost of credit and capital (61 percent)

“The CFOs we surveyed are primarily concerned about cost, not demand,” says Christopher Schenkenberg, a Grant Thornton partner and national business-line leader of the firm’s tax practice. “That’s exactly what I’m hearing from clients, too. Among our respondents, 71 percent are confident on demand, but only 57 percent are confident about controlling costs.”

As interest rates rose throughout the summer, CFO optimism continued to plummet—and with it, CFO expectations. Of the 61 percent of survey respondents who expect profits to increase, only 15 percent expect growth of more than 10 percent. Meanwhile, 39 percent of CFOs expect their profits to contract. Within that group, 30 percent expect a contraction of less than 10 percent, while 9 percent of respondents expect their business to contract by more than 10 percent.

Many CFOs are concerned that inflation will have a trickle-down effect on their ability to meet goals in key areas. This is especially evident in supply-chain concerns. Only 54 percent of CFOs are confident they will meet their supply-chain goals, down from 67 percent in the first quarter. As a result, cost control is top-of-mind for many CFOs, a prospect that may sting business leaders who were hoping the Covid-19 rebound of 2021 would carry over into 2022.

Forty-one percent of CFOs say cybersecurity will be their top challenge over the next six months, while the supply chain (37 percent) and the remote workforce (32 percent) came in second and third, respectively, on the list of top three concerns. Although other challenges have ebbed and flowed over the past year, supply-chain issues have steadily risen, reaching a 13 percentage point increase since the start of 2021.

Cash and liquidity saw the biggest quarter-to-quarter jump, leaping from 19 percent in Grant Thornton’s first-quarter survey to 31 percent in the new findings. CFOs also are concerned about attracting and retaining talent: Sixty-two percent say a possible recession will pose a significant challenge to their recruitment and retention efforts.

On the positive side, 65 percent of the CFOs surveyed believe the economic impact of Covid-19 is waning—an increase of 15 percentage points from the previous survey. Two-thirds of those surveyed expect their companies to meet growth goals, and 61 percent expect an increase in net profits over the next 12 months.

From: BenefitsPRO