By Rob Starr, Big4.com Content Manager.
Deloitte released its Q2 CFO Signal survey recently and the findings told a tale of positive and negative sentiment. While CFOs’ long-term outlook for the North American economy remains strong, their confidence in some metrics like revenue growth, earnings, and domestic hiring seemed to be heading in the other direction. In fact, the percentage of CFOs expressing rising optimism in their company’s prospects fell to 38 percent from last quarter’s 48 percent. Greg Dickinson is the leader of Deloitte LLP’s CFO Signals™ survey and he lent some perspective to the research for us via email.
What’s behind the plunging revenue growth expectations?
I think these declines show a general concern about customer demand in companies’ major markets, and we know that the dominant market for most of the surveyed companies is North America (they are largely multinationals, but a very high proportion of their revenue still comes from N.A.). CFOs mentioned a possible pullback in the US economy as one of their most worrisome risks, and this was a change from previous quarters.
What can you say about the findings around hiring expectations?
We saw a welcome rise in expectations in the second quarter, but this quarter showed a steep
drop. I suspect this at least partly linked to the decline in revenue growth expectations, and it may also be the case that companies have already been ramping hiring and won’t be doing as much next year.
How do these findings translate into continued net optimism?
It’s important to remember that the survey responses were collected before the Greek situation escalated and before the Chinese stock market sank, so I think net optimism may be lower now. In general, though, I think there is a sense that, despite lots of near-term challenges in the business environment, the longer term path is still generally positive.
What are the other noteworthy takeaways?
I think it’s also notable that so many CFOs consider the equity markets overvalued. This might suggest they think there is a bit of a disconnect between equity prices and the actual performance prospects of economies and companies.
What trends appear likely in the future?
I think it will be interesting to see how sentiment shifts in the run-up to the 2016 presidential elections in the US. There will be an escalated discussion about the health and trajectory of the US economy, regulation, and a lot of other factors, and this may cause some shits in CFOs’ perceptions.