The strong optimism felt by CFOs at the beginning of the year has started to falter, according to the results of the 2017 Q3 CFO Signals survey from Deloitte. CFOs still believe economic conditions are good, but perceptions for growth in North America fell during the quarter.
Nearly two-thirds (64 percent) of CFO respondents rated current conditions as good – near record levels for the survey. But fewer than half (45 percent) expect better conditions in a year, down from 58 percent in the second quarter.
“Considering the multiyear highs in sentiment recorded in the first quarter of this year and continued strength in the second quarter, the downturn in CFOs’ sentiment and expectations this quarter may indicate that lingering political, talent and geopolitical concerns are beginning to take their toll,” said Sandy Cockrell III, national managing partner of the U.S. CFO Program, Deloitte LLP.
It's also a trend we've seen often over the last several years. We start the year with high levels of optimism about what's to come in the next 12 months, but as the year moves on, that optimism wanes. Promised policy changes fail to materialize with any expediency, and the overall economy continues its transformation as traditional businesses have to learn to adapt to the new mechanisms for going to market. As we've said many times in the pages of MDM, we're in the midst of great change. We can't stop it, but we can figure out how to adjust to this new reality.
Other highlights from the 2017 Q3 CFO Signals survey:
Current conditions in Europe rose but are still seen as challenging, with 29 percent rating conditions at good and 32 percent expecting better conditions in a year. China was flat at 32 percent and 30 percent.
The change in trajectory for U.S. CFOs revolves around ongoing geopolitical conflicts and the "political turmoil" in Washington, which to date has resulted in little activity on key initiatives such as health care and tax reform.
Perhaps the starkest shift for the third-quarter sentiment occurred around the question on own-company prospects.
"Coming off a survey high two quarters ago, optimism continued to decline – largely on growing pessimism in the U.S.; health care/pharma and technology improved, but manufacturing and energy/resources declined sharply," the report notes. Manufacturing outlook tumbled from +52 to +22, and energy/resources fell from +47 to +19.
Overall, U.S. CFOs still viewed prospects positively, registering a net positive 27.9. But that's down significantly from last quarter's +47. Meanwhile in Canada, net optimism increased to +31 from +20.