In the latest batch of Deloitte’s quarterly CFO surveys, respondents tended to express more optimism in their own companies’ prospects than they did in the economy at large.
The Big Four’s second-quarter CFO Signals survey was no exception, with respondents showing a high degree of confidence in their own businesses’ future even as their feelings on the wider economy dipped.
The survey, released on Wednesday, showed that 90% of respondents said they’re optimistic in their organizations’ future, up from 74% in Deloitte’s Q1 survey. And yet, when respondents were asked to assess the future of their regional economy, 50% said they believed the North American economy would be “better in a year,” and just 37% described it as “good now.”
Though the survey didn’t ask for respondents’ specific reasoning behind their sentiments, their answers to questions about internal and external risks may provide some clues. Inflation was selected among the top three external risks by 50% of participants. Forty-nine percent of respondents picked supply chain disruption among the top three external risks.
Most respondents (51%) selected talent among their top three biggest internal risks, though technology deployment, picked as a top risk by 49% of respondents, wasn’t far behind. At a time of mass layoffs that a few companies have directly attributed to artificial intelligence adoption, that may sound contradictory. But Ed Hardy, U.S. finance services leader at Deloitte, explained that many companies are simply trying to determine what type of talent they need to best take advantage of the technology.
Nascent technologies like AI, he said in an interview, are challenging companies’ “ethos of what the typical talent team looks like.”
“They still need all the capabilities they previously had, but they now need to add an element of individuals who are savvy in AI,” Hardy said.
Deloitte’s survey included responses from 200 CFOs in the U.S., Canada and Mexico working at organizations with at least $1 billion in revenue.
While the respondents were all based in North America, Deloitte asked respondents for their views across a total of five “key regional economies,” which also included South America, Europe, Asia minus China and China alone. Hardy noted that respondents’ views on those regions were similarly down, with one exception.
“Across the board, most of the views of the near-term and the long-term declined,” he said. “Europe was the one anomaly where it improved currently, but it was still low.”
As the report put it: “Sentiment about the current state of several key regional economies decreased substantially. Predictions for what the state of those economies may be in 12 months aren’t much better.”
The CFO Signals survey also includes an overall “CFO confidence score,” which Deloitte tabulates by averaging the scores of five current and five future business environment questions, among other calculations. In the Q2 survey, the score stood at 5.9 out of 10, which Deloitte put in the “medium” confidence category. That marks a drop from the “high” confidence rating of 6.3 in the first quarter of this year.
Respondents’ expectations for revenue and earnings growth in the latest survey were largely in line with those in the first quarter. In the most recent survey, participants on average expected 4.5% revenue growth over the next year, compared to 4.4% in the prior quarter. Earnings expectation remained the same at a projected 4% growth rate for both quarters, according to the report.
Respondents’ apparent confidence in their own companies’ prospects was again evident in measurements of risk appetite. In the second-quarter survey, 59% of participants said now is a good time to take greater risks, up from 48% in the prior quarter.
“While they believe there are headwinds ahead in the macroeconomic environment, they believe their organizations are positioned for taking on risk,” Hardy said. “It could be a sign that CFOs are getting greater confidence in their ability to navigate” such headwinds.
