CFO Optimism Down in Q1
Despite economic growth and improved job reports, chief financial officers around the United States are feeling less optimistic than they have in three years, a new study found. Deloitte’s first quarter “CFO Signals” survey gathered responses from 109 CFOs from a variety of major companies and sectors and found financial leaders are feeling more pessimistic than in years past, fueled in part by price stagnation and concerns over continued growth in the economy.
According to the report, 47 percent of respondents said they were feeling an increase in optimism regarding company finances, while 20 percent expressed a fall in optimism for first quarter 2014, averaging out to a net optimism rating of 27 percentage points. This is down from last quarter, when a net 33 percent of survey participants said they were feeling optimistic about business. This quarter’s findings mark the lowest optimism level recorded since the survey began in 2010.
Survey presents mixed results
Year over year earnings projections fell to 7.9 percent, down from 12.1 percent last year, hitting the lowest rate recorded in the survey’s history. Despite the fact that first quarter survey results are usually more optimistic than the rest of the year, the recent survey also found CFOs aren’t feeling as excited as they usually are for the year ahead. According to the study, year over year expectations for sales growth moved upward slightly to 4.6 percent from last quarter’s 4.1 percent, but are down overall from last year’s 5.4 percent figure.
“We normally see a clear boost in CFOs’ sentiment and expectations in the first quarter of a calendar year, but the effects are far weaker this time,” said Sanford Cockrell, national managing partner at Deloitte. “There are clear concerns emerging on the stability of the economic recovery, price stagnation and flat employment affecting consumer demand. These are constraining expectations for 2014, but organizations still remain generally focused on growth over risk.”
The news was not all bad, however. More than half of the respondents – 51 percent – said they plan on spending working capital on growth and innovation, while 58 percent said they will approach growth by targeting select opportunities that will lend themselves to improved business practices and finances.
“It’s a positive sign that organizations are focusing on growth, but expectations for capital investment are not strong by historical standards,” said Greg Dickinson, director of Deloitte and manager of the survey.
Partly because they are focusing on new means of growth, 23 percent of respondents said they expect to carry out fundamental changes to their business strategies over the next 12 months.
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