With the shaky state of the U.S. economy one of the dominant themes of the presidential campaign, it's perhaps not surprising that almost half (47%) of the finance executives at large companies are less optimistic than they were in the previous quarter. According to a new survey of chief financial officers conducted by consulting firm Deloitte, nearly 60% of all CFOs say that either U.S. or global economic conditions is keeping them up at night more than anything else. And from that respondent group, one-third specifically cite current conditions in Europe.
"When you take global economic conditions that are already difficult, and then add in the uncertainty that comes with elections and a fiscal cliff in the U.S., it is easy to see why CFOs' expectations would become more conservative,"explains Sanford Cockrell III, national managing partner of Deloitte's CFO Program.
One trend that is accelerating is the retreat from the Eurozone, as two-thirds of the CFOs surveyed say they are reducing their exposure to the continent. One out of five respondents are scaling back on investments in their current European operations, with some saying they have closed factories or otherwise scaled back in terms of reducing head count and capital spending.
Another survey of U.S. CFOs, this one conducted by Bank of America Merrill Lynch, paints the situation in even bleaker colors, if that's possible. Thirteen percent of the respondents expect the economy to contract this year, a big jump from the 4% who said the same thing back in the spring. When asked to grade the current U.S. economy, the average score was 53 out of 100, and the score for the global economy was even lower, at 45 out of 100. Only 46% say they anticipate more hiring this year. And 70% say that government leaders, or to be more precise, a lack of leadership in Washington, is a major concern.
"The combination of uncertainly and volatility have understandably made CFOs more cautious as the year progressed,"notes Laura Whitley, head of global commercial banking at Bank of America Merrill Lynch. "While many CFOs remain optimistic that their own companies will grow, they recognize there are many factors out of their control, and significant concerns remain about the outlook for the economy the rest of this year."
In a third study of CEOs, CFOs and other senior-level financial managers throughout the world, those who are pessimistic about the global economy outnumber the optimists by an 8-to-1 margin. While C-suite executives worldwide share a common concern over the strength of their own countries’ prospects, the CGMA Global Economic Forecast indicates that the biggest drop in optimism came from US managers, where the percentage of optimists dropped from 36% in the previous quarter to the current 22%.