North American CFOs fear a downturn within the next two years; European CFOs are more optimistic.
Nearly all 159 North American CFOs who participated in Deloitte's second-quarter CFO Signals survery expect an economic downturn in the next two years. Almost 80% of these anticipate a mild slowdown. Fear of trade wars was a top concern among CFOs in Deloitte's 2018 surveys; today, fears over US-China friction remain but are increasingly overshadowed by worries about political instability and gridlock.
The outlook for Europe was weak, with just 10% of surveyed CFOs seeing current conditions as "good" and only 4% expecting an improvement over the next 12 months. Expectations surrounding the Chinese economy improved compared to the last quarter (with 26% seeing conditions as good), but only 10% foresee better conditions over the next year.
"With mixed economic indicators in the US and observed slowing in several key economies around the globe, it is understandable that CFOs' optimism dipped this quarter," said Deloitte US CEO Joe Ucuzoglu. "At the same time, we continue to see relative confidence across our client base in the underlying fundamentals of the US economy and CFOs are highly focused on acquiring and retaining talent."
Similar responses could be found in Deloitte's Spring 2019 European CFO Survey, which found that business confidence stagnating among European CFOs. However, more than 66% of European CFOs do not expect a recession in the next 18 months in Europe. Just 20% of European CEO foresee a US recession.
"As the external environment becomes more uncertain, economic concerns predominate among European businesses," said Christopher Nuerk, managing partner, clients and industries, with Deloitte in a note. "In addition, deep structural changes are taking place—and they can be expected to speed up rather than slow down during a period of economic difficulty."
Nuerk added that the cost-reduction approach that many companies rely on in a downturn, may not be enough to cope in this environment. Unsurprisingly, Brexit was a major focus for European CFO worries. More than 80% of European CFOs said they expected the domestic business environment to deteriorate as a result of Brexit.
While of the lack of clarity around the Brexit process has hit confidence, the survey report said that more UK CFOs remain unchanged in their level of optimism. This suggests some are learning to cope with the uncertainty. On the other hand, overall confidence dropped in almost all countries within the Eurozone area.