It’s not surprising that your peers have a less optimistic outlook about the economy now than they did at the beginning of the year.
In fact, only about 39% of CFOs surveyed by Grant Thornton in its Q2 2022 CFO Survey were optimistic about the state of the U.S. economy over the next six months. Another 38% had a pessimistic outlook.
Reasons for different outlooks
According to the survey, some of the reasons why your peers have a negative outlook of the economy include:
- Increased cost of goods or services (73%)
- Increased cost of energy (71%)
- Supply chain and inventory concerns (66%)
- Threat of a recession caused by rate hikes (64%)
- Increased cost of capital/credit (61%)
- Inflationary wage spiral (57%)
- War in Ukraine/global instability (45%), and
- New COVID variants/outbreaks (19%).
However, those who have a positive outlook of the economy for the next six months cite several developments that may keep things stable:
- The economic impact of COVID is waning (65%)
- Increased household wealth will continue to drive demand (60%)
- Low and stable unemployment (49%), and
- Rate hikes will cut inflation without causing a recession (39%).
Expectations & responses from CFOs
While it’s uncertain whether the U.S. will enter a recession next year, most of your peers are proceeding with caution just in case. Over 70% of those surveyed expect the Fed’s rate hikes to cause a recession.
In spite of this, many CFOs expect to meet their company’s growth goals – 66% of those surveyed – but those goals have been adjusted in light of a potential recession. Only about 61% said they’d increase net profits over the next year, and out of that figure, just 15% expect growth of more than 10%.
One factor that’s keeping expectations lower is consistent struggles with the supply chain, which have plagued employers since the beginning of the pandemic.
A little over half (54%) of CFOs surveyed were confident that they’d meet supply chain goals. Between issues obtaining some products and having a surplus of others, coupled with financial challenges, CFOs expect to be dealing with these obstacles through the beginning of 2023.
And because of this, cost control is becoming more of an issue for your peers. Cost optimization was the top area of focus cited this past quarter by CFOs surveyed, followed by liquidity and debt/access to capital.
Right now, the top cost-cutting strategy your peers are taking is to reduce investment in travel. CFOs were twice as likely to put travel funding on the chopping block than any other aspect of business. If business travel is a priority for your firm, it’s important to work with A/P and your road warriors to cut the cost of travel where you can.
