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Deloitte CFO survey shows optimism waning

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On the whole, optimism among North American chief financial officers (CFOs) regarding their own companies' prospects remains durable, according to Deloitte's second quarter (Q2) CFO Signals™ survey. However, weaker perceptions of major economies, substantial pessimism among manufacturing CFOs and a decline in key expectations among U.S. CFOs suggest negative undercurrents.

Specifically, the survey, which tracks the thinking and actions of more than 100 CFOs from very large North American companies, recorded only a small decrease in the proportion of CFOs expressing improved optimism relative to the prior quarter. For the second quarter, 44.3 percent of CFOs expressed improving optimism while 18.6 percent expressed declining optimism – for a net optimism of plus 25.7 percentage points, down about one point since the first quarter. Since the fourth quarter of 2013, optimism has moved by less than eight percentage points – the lowest period of volatility since the survey began in 2010.

CFOs' optimism regarding key global economies, however, dropped significantly. Sentiment regarding the performance of the Chinese economy one year from now fell for the third consecutive quarter, though it remains positive overall. Confidence in Europe's trajectory also fell, but the long-term trend of growing confidence about the continent remains. In North America, CFOs were slightly less confident about the economy today and in one year's time, though optimism remains relatively strong and at similar levels to recent quarters.

Overall, CFOs' expectations for key performance metrics like earnings and sales rose, fueled by Canadian CFOs' strong growth forecasts. Year-over-year expectations for earnings growth rose from a survey low of 7.9* percent in the first quarter to 8.9* percent, while sales jumped from 4.6* percent to 6.1* percent.

U.S. CFOs signaled declining expectations for two key metrics. Earnings growth expectations fell from 9.3* percent last quarter to 8.1* percent, and are down year-on-year from 10.3* percent. Capital spending expectations also fell for the fifth consecutive quarter to 5.1* percent. U.S. CFOs' sales expectations did rise from 4.9* percent last quarter to 5.4* percent, but likewise remain down year-on-year.

"Net optimism is holding steady, but lower earnings and capital spending growth expectations suggest U.S. CFOs are factoring in bumps that were not on their radar screens three months ago," said Sanford Cockrell III, national managing partner, Deloitte LLP and leader of the Deloitte CFO Program. "Nevertheless, there does seem to be some stabilization around CFOs' sentiment and expectations."

CFOs still indicate a bias toward pursuing opportunity over limiting risk, but they also say that government policy and regulation remain substantial barriers to growth. Talent costs were also cited as a notable impediment by 36 percent of CFOs, up slightly from last quarter and around twice the level cited one year ago. Furthermore, the obstacle of talent availability declined to 26 percent this quarter from 39 percent last quarter, though it remained higher than one year ago.

Talent costs were one of several issues noted by manufacturing CFOs, who expressed lower optimism and cited lower expectations for the year ahead than CFOs in other sectors. Thirty-nine percent expressed declining optimism, up from 18 percent last quarter, more than double the level for CFOs overall. A rise in pessimism regarding internal factors was a key driver of this decreasing optimism. Earnings expectations fell from 12.9* percent to 7.7* percent year-on-year and were down for the second consecutive quarter. Capital spending also dropped from 12.5* percent last quarter to 9.5* percent, while sales remained broadly flat as they have done for several quarters.

"CFOs' sentiment and expectations over the last year have been less volatile. This is encouraging, but we have yet to see an acceleration in key survey metrics," noted Greg Dickinson, director, Deloitte LLP, who leads the North American CFO Signals survey. "Weaker sentiment this quarter among U.S. and manufacturing CFOs suggests we may be waiting a while longer to see it."

With the Foreign Account Tax Compliance Act (FATCA) effective as of July 1, 2014, CFOs also confirmed that they still have work to do on preparation and implementation for the Act. Only eight percent of CFOs reported that they have processes in place to make the necessary withholdings as of July 1, and only nine percent that their companies have figured out how FATCA affects their non-U.S. employee plans. Overall, 14 percent have completed the classification effort, while 23 percent report that the process is underway.

"FATCA is a prime example of the complex tax environment in which today's CFOs operate, where U.S. tax law impacts an organization's global financial operations," said Carl Allegretti, chairman and chief executive officer of Deloitte Tax LLP. "CFOs and their tax departments should consider working together to develop an actionable plan to address FATCA and mitigate the risks of non-compliance."

Additional findings from the Deloitte Q2 CFO Signals survey include:

  • Further cost cutting the key ask from CEOs: More than half of CFOs (58 percent) cite cost control as one of their CEOs' top-three priorities for them to tackle, though managing performance and growing revenue are not far behind.
  • Companies' social media efforts often focus on risk management first: CFOs report substantial effort and success in establishing formal policies around employee use of social media and in educating staff around the risks and benefits. Almost 70 percent say they have utilized social media as a brand-building channel or plan to do so, but many of those who already have say results have been poor.
  • CFOs do use social media to network: About 46 percent of CFOs use social media (other than email) to network with peers, though only 5 percent do it on a regular basis. Just under 45 percent of CFOs use it to identify and recruit talent, though less (only 25 percent) use social media to communicate with employees.  

To download a copy of the survey, please visit:  

*All numbers with an asterisk are averages that have been adjusted to eliminate the effects of stark outliers.

About The Deloitte CFO Survey 

The Deloitte CFO Signals™ survey for the second quarter of 2014 was conducted between May 9, 2014 and May 23, 2014. Eighty-one percent of the 113 CFO respondents were from organizations with more than $1 billion in annual revenues, and 71 percent were from publicly-traded organizations.

Each quarter, CFO Signals tracks the thinking and actions of CFOs representing many of North America's largest and most influential organizations. This report summarizes CFOs' opinions in four areas: business environment, company priorities and expectations, finance priorities, and CFOs' personal priorities.

For more information about Deloitte's CFO Signals, or to inquire about participating in the survey, please contact


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