Deloitte CFO Signals™ Survey: CFO Optimism Wanes as Economic Concerns Return and Internal Challenges Rise
NEW YORK, July 13, 2011 – As their companies shift from recovery to growth, chief financial officers (CFOs) are becoming increasingly concerned about the external and internal factors that threaten their progress. According to the results of the Deloitte CFO Signals survey for the second quarter of 2011, CFOs are more apprehensive about the soundness of capital investments and the possibility of internal missteps as they work to further their organizations’ growth agendas. This coincides with their returning concerns over the economic recovery.
Tracking the perspectives of CFOs from some of the largest and most influential companies in North America, the study found that “own-company optimism” fell markedly this quarter as 40 percent of respondents say they have a more positive outlook, down from 62 percent last quarter. Moreover, the percent of respondents who say they are less optimistic doubled from 16 percent—the lowest level in the previous 12 months—to 32 percent.
Behind the sagging sentiments are concerns over the execution of corporate growth agendas. Whereas past pessimism was driven largely by deteriorating assessments of the macro-business environment, roughly half of the renewed doubt this quarter is driven by internal concerns. In addition, CFOs are having second thoughts about their capital investments. In fact, almost half (49 percent) of the CFOs surveyed are more worried about the quality of their capital investments than they were three years ago and 40 percent are more concerned about the level of those investments.
“It’s fair to say that delivering growth is a lot harder than cost-cutting in this environment,” said Sanford Cockrell III, national managing partner, CFO Program, Deloitte LLP. “In addition to the continued regulatory overhang and economic uncertainty, the very real possibility of internal missteps is making CFOs understandably nervous and leading them to invest cautiously and formulate contingency plans.”
Still, CFOs appear to be only raising a cautionary flag at this point. They continue to expect year-over-year revenue growth (7.1 percent this quarter versus 8.2 percent last quarter) and positive earnings growth (14 percent versus 12.6 percent last quarter) as well as increased capital spending (10.7 percent this quarter compared to 11.8 percent last quarter). Approximately 64 percent of CFOs also expect domestic hiring increases although the hiring will not be substantial--year-over-year domestic hiring growth projections for the second quarter of 2011 remained low at 2 percent and slightly higher than last quarter’s 1.8 percent.
“CFOs foresee moderate growth, but rising volatility in input prices, government policy and economic trends is making them wary of major investments,” explained Greg Dickinson, who leads the Deloitte CFO Signals survey. “Boards and other stakeholders appear to agree that cash enhances strategic options and are not currently pressing for capital investment.”
The Deloitte CFO Signals survey also revealed the following (estimates are adjusted averages to reduce the effect of outliers):
To download a copy of the survey, please visit www.deloitte.com/us/pr/cfosignals2011q2.
The Deloitte CFO Signals survey for the second quarter of 2011was conducted from May 16 to May 27, 2011. A total of 78 CFOs participated in the study with 75 percent representing companies with more than $1 billion in annual revenues and 75 percent from publicly-traded companies.
Each quarterly CFO Signals report analyzes CFOs’ opinions in five areas: CFO career, finance organization, company, industry, and economy. For more information about the Deloitte CFO Signals survey, or to participate in the survey, please contact NACFOSurvey@deloitte.com.
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