Through a quarterly survey, CFO Signals attempts to track the thinking and actions of CFOs representing many of North America’s largest and most influential companies. The two industries represented largest in the survey respondents are manufacturing and financial services.
Key highlights to note:
- CFOs overwhelmingly expect stronger economic performance in the U.S., and most expect improvement in Canada and Mexico.
- Two-thirds of CFOs say securing/retaining talent will be difficult; more than half say they are substituting technology for labor.
- Data/analytics is the top trend CFOs say is affecting their strategies; convergence/disruption is second.
Deloitte breaks the survey results into five sections: Perceptions, Sentiment, Expectations and two special topics: Business Planning and the CFO Role in Business Planning.
Each section is designed to focus on key findings and insights from those areas.
1. Perceptions: assessments of regional economies, markets and risk
- CFOs assessments of the North American economy remained very strong in the second and third quarters of 2018. Additionally, perceptions of Europe’s and China’s current state and trajectory both hit new survey highs this quarter.
- Staggering CFO perceptions: 84% of surveyed CFOs say U.S. equity markets are overvalued and 85% of CFOs say debt financing is currently more attractive than equity financing.
- 63% of CFOs feel it is still an opportune time to be taking upon greater amounts of risk, marking a survey high.
2. Sentiment most “worrisome” risks
|What external and internal risks worries you the most?|
|Interest Rates||Talent Levels/Quality|
|Political Turmoil/Policy Uncertainty||Maintaining Data Security|
|Cybersecurity||Cost Controls & Reduction|
3.Expectations: growth in key metrics, year-over-year
- Revenue growth declined, from 5.7% to 4.7% in the U.S. However, this remains above the two-year average.
- Earnings growth in the U.S. rose from 7.9% to 8.4% but declined for Canada and Mexico. Retail, Manufacturing and Technology are the leading industries.
- Capital investment growth fell for the third straight quarter but is still among five-year highs.
- Domestic hiring growth slid from 2.6% to 2.0%. The U.S. remains in great shape, but Canada and Mexico experienced sharp slides in 4Q 2017.
4.Business Planning: macroeconomic expectations and company expectations
|What are CFO expectations forthe macroeconomic environment?|
|Labor costs will increase||68% agree, 14% disagree|
|Business spending will be strong||59% agree, 30% disagree|
|British pound will be stronger vs. the US dollar||16% agree, 33% disagree|
|US economy will improve||54% agree, 30% disagree|
|Federal Funds rate will remain at/below 2%||56% agree, 14% disagree|
CFOs expect new technologies to affect their offerings and operations; they also expect a heavy focus on securing and retaining talent and on evolving their talent strategies. Industry and country differences were pronounced.