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Why CFOs are most worried about the economy

Yahoo Finance

American CFOs are increasingly concerned about the economy, as their expectations for growth remain near five-year lows, according to Deloitte's third quarter CFO Signals survey. Nineteen percent of those surveyed expressed declining optimism, citing uncertainty about interest rates, exchange rates and oil prices.

The biggest topic causing broad-based concern is the Chinese economy says Sanford Cockrell III, Global Leader of Deloitte's CFO program.

Only 4% regard China’s economy as good, down sharply from 23% in the second quarter. Notably, the survey was conducted before China’s recent stock market turmoil.

“This survey concluded immediately before the market meltdown on August 24th, so it really was almost predicting what was going to happen," says Cockrell. "If the CFOs seemed to sniff something out before it even happened, that’s impressive.”

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In addition, the survey found that 60% of CFOs believe that U.S. equities are overvalued, down from 65% in the prior quarter.

“Not a lot of movement [from last quarter], but still some concern that markets are a little bit overheated in terms of their pricing,” says Cockrell.

As for debt as a financing option, 80% of CFOs see debt as an attractive choice, down significantly from the levels seen over the past several quarters.

Those who saw debt as an attractive option in the second quarter “was well above ninety percent," says Cockrell, "so concerns about terms and conditions, as well as interest rates, are getting built in.”

Some specific findings from the survey:

    •   Revenue growth expectations rose to 4.4% from last quarter’s survey-low 3.1%, but are still among the lowest in the five- year history of this survey. 

    •   Earnings growth expectations held at last quarter’s survey-low 6.5%. 

    •   Fifty-nine percent of CFOs describe North American economic conditions as good, and 55% expect better conditions in a year 

    •   CFOs expect future shortages of leaders (executives and function heads), innovators (engineers, researchers, developers, and designers) and business developers (sales and marketing professionals).