By Rob Starr, Big4.com, Content Manager
Deloitte’s fourth quarter (4Q 2016) CFO Signals survey, finds CFOs generally are seeing big policy changes ahead in the next four years in taxes, repatriation of cash to the U.S., infrastructure investments, immigration and health care. Greg Dickinson, managing director, Deloitte LLP, who leads the North American CFO Signals survey, answered some questions for Big4.com.
Q: Why the sharp contrast between rising optimism regarding their own company prospects and all four business outlook metrics tracked by the CFO Signals survey for 27 consecutive quarters?
A: Part of this relates to timing. Sentiment (i.e., net optimism from the survey) can improve pretty quickly, whereas business outlook metrics (and 12 month expectations for them) can take longer to change. It will be interesting to see if these latter metrics begin to rise as companies begin to adjust their actual/official forecasts under the new administration.
Q: What can you say about the findings around industry skilled talent?
A: Companies increasingly need people who understand the business—as opposed to people who have more administrative, general skills that would apply in any business. People who have enough industry-specific knowledge to make good business decisions, and to do so
in an environment that requires rapid changes, seem to be in relatively short supply.
CFOs largely expect industry-skilled talent to be difficult to acquire, and wage increases to be necessary to secure and retain highly-skilled workers. In regards to technological advances, CFOs are split on whether or not technology will replace talent and whether or not wage increases will be required to secure and retain lower skilled workers, with strong industry differences. CFOs are also split, largely across industry lines, on whether they will hire more people than they will let go.
Q: What does the survey say about growth expectations and other negative findings?
A:The survey findings indicate that CFOs are concerned about where global economic growth will come from, especially if countries are becoming more protectionist.
This quarter, CFO expectations for growth in revenue, earnings, capital spending and domestic hiring all remain near their survey lows. While we do not necessarily see this as “negative,“ it is in line with trends we have seen in recent past quarters. Year-over-year revenue growth expectations of 3.7 percent are down from last quarter’s reading of 4.2 percent, among the lowest in survey history. Earnings growth expectations of 6.4 percent are up slightly from last quarter’s 6.1 percent, but still near their survey low. Growth expectations of 3.6 percent in capital investment are down sharply from last quarter’s 5.6 percent, and domestic hiring growth also fell from last quarter’s 2.3 percent to 1.3 percent this quarter.
Q: What’s on the positive side?
A: In contrast to the somber expectations of the four business outlook metrics, CFOs’ sentiment shows considerable optimism regarding own company prospects. Net optimism this quarter remains strong at +23.4, and 43 percent of CFOs express rising optimism about their own companies’ prospects, up from 35 percent last quarter. Also, net optimism for the U.S. rose sharply from last quarter’s +16.0 to +34.0 this quarter.
Q: What do respondents see in the future?
A: Major changes in some important policy areas under the new Administration.