CFOs Souring on Corporate Profits in America, Canada

By Michael Foster, Big4.com Blogger

A new survey by Deloitte showed that CFOs are retreating from previous optimism about the economic prospects of North American markets as continued economic difficulties around the world signal a threat to corporate performance in the near term.

The quarterly survey, titled Deloitte CFO Signals, showed that 39 per cent of CFOs are more optimistic this quarter about their companies’ prospects than last quarter, down from 63 per cent the previous quarter. A total of 29 per cent of respondents based in North America are feeling pessimistic about their companies’ prospects, compared to 15 per cent from the previous quarter.

National Managing Partner for Deloitte’s CFO Program pointed to unstable global conditions as the cause for this resurgance of bad sentiment. “Continued high unemployment is driving rising concerns about consumer demand at home, and that seems to be shifting some of CFOs’ focus away from the things that are still uncertain,” he said, pointing to “the European debt crisis, the upcoming elections in Europe and the U.S., and the fiscal cliff in the U.S.”

One of the top concerns for CFOs was stubbornly high unemployment figures. Of all U.S. CFOs, a total of 59 per cent said that it was one of their top three concerns, as compared to 43 per cent in the previous quarter, when unemployment rates were looking to slow more aggressively than they have. Unemployment and the slow rate of growth in the U.S. and abroad is making CFOs question the earnings potential of large companies. “With large corporations performing very well over the past few years, there is rising concern about how much longer they can keep it up in a slow-growth world,” said Greg Dickinson, Leader of the CFO Signals survey. “A large percentage of them [CFOs] are seeing diminishing returns and do not believe the gains will continue beyond a year from now.”