More CFOs Worry About Inflation than Recession

That's according to Deloitte CFO Signals, which found 46% of surveyed CFOs expect the North American economy to be in a recession by the New Year, and 39% expect the economy to be in a period of stagflation.  But their big worry – by a three-to-one margin – is persistent inflation.  

Just 33% of CFOs rate the current North American economy as good or very good, a marked decline from 52% in the second quarter of 2022. But 24% say this is the time to buy stocks.  That's the highest since the first quarter of 2016, according to CFO Signals, which commissions its own surveys.

CFOs' sentiment toward current conditions in all five economic regions covered in the CFO Signals survey fell this quarter. For North America, 33% of CFOs rated the current economy as good or very good, a noticeable decline from 52% in 2Q22.

However, 29% of CFOs indicated conditions in North America will improve in a year, up from 18% in the prior quarter. Sentiment was similarly gloomy for the current economies of Europe, China and South America, with just 7% of CFOs viewing conditions as good or very good in each region — all representing a decline from 2Q22. The economy of Asia, excluding China, fared slightly better, with 17% of CFOs considering it as good or very good.

The gloom extends to the CFOs own companies, with just 19% expressing more optimism for their companies financial prospects.  That's down from 27% in the prior quarter and the lowest since the second quarter of 2020.  

But:  The CFOs also say this is a good time to take risks.  That metric now stands at 38%, up from 35% in the second quarter.  Inflation and geopolitics stood out most prominently among CFOs' long list of external risks. Internally, talent, especially retention issues, continued to dominate CFOs' list of internal worries.

For the second consecutive quarter, CFOs lowered their year-over-year growth expectations for revenue, earnings and capital spending. Revenue growth decreased to 6.2% from 7.8%, earnings growth declined to 6.4% from 8.4%, and capital spending growth expectations fell to 4.3% from 11.2%. CFOs also reduced their growth expectations for both domestic wages/salaries and domestic hiring — the first significant decrease since the 2Q20 CFO Signals survey. Domestic wages/salaries growth expectations decreased to 4.8% from 5.3%, and domestic hiring growth fell to 2.6% from 5.3%.  Dividend growth remained flat on a quarter-to-quarter basis, at 4%.