The survey, which polls CFOs of public and private businesses in the U.S. and Europe on their economic and business confidence, reported that the optimism index for U.S. CFOs for the global economy this quarter averaged 55.78, up only modestly from the previous quarter (54.96).
Similarly, CFO confidence in the U.S. economy saw similar movement (65.26 from 64.17 in the previous quarter).
Although EU CFO optimism in the U.S. economy increased to an average of 65.73 from 64.72, their confidence in the global economy sank nearly five points to 49.48 from 54.80. CFOs in Europe also demonstrated a decline in optimism toward the financial prospects for their company, which dropped five points to 54.52 on the index this quarter (from 59.79).
“CFOs in Europe and the U.S. had markedly different attitudes about the impact of global crises on their economies and businesses. European CFOs were far more concerned about the standoff between Russia and Ukraine, ranking this crisis in the top three with regard to implications for the European economy, the global economy and their own businesses,” said Linda Allen, Professor of Economics and Finance for the Zicklin School of Business at Baruch College, in a statement.
“In contrast, U.S. CFOs were more concerned about the rise of ISIS and immigration/refugee issues than were their European counterparts. However, all respondents ranked the slowdown in the European economy as a top concern for the future.”
Europe’s sluggish economy and reform policies in China are the global crises that are having the most substantial impact on the economy and companies, according to CFOs. More than half (55 percent) of EU CFOs, and a third (32 percent) of U.S. CFOs thought the European economy would have the biggest impact on long-term economic conditions in their respective countries.
In further examining the European economy, EU CFOs believed that EU economic recovery is far into the future. More than a third of EU CFOs (35 percent) do not expect a recovery in the European economy until 2017 or beyond. A fifth (20 percent) of U.S. CFOs said that they think a recovery is feasible by the second half of 2015, and about a third (31 percent) predicted one for 2016.
Spending Caution
The lower optimism is reflected in cautious spending plans among respondents. This quarter, 56 percent of CFOs in Europe and 35 percent of CFOs in the U.S. said that they are approaching capital spending with caution, compared with a third of U.S. (33 percent) and a fifth of EU CFOs (22 percent), who reported spending at normal rates.
Wage, Employment Growth Steady
Despite their decline in economic and business confidence, wage levels and employment expectations for CFOs remained stable this quarter. Thirty eight percent of U.S. CFOs stated the levels they are paying are about the same as the levels they paid this time last year.
Furthermore, 61 percent of U.S. CFOs and 32 percent of EU CFOs reported that wage levels are rising when compared with the same time last year. Sixty eight percent of U.S. CFOs and 42 percent of EU CFOs plan to hire employees within the next six months; a somewhat higher percentage of CFOs in Europe (53 percent) are not hiring. The majority of CFOs (84 percent in the U.S. and 59 percent in Europe) stated they have not been forced to reduce their company’s headcount in the past year.
"With the myriad of economic and business issues facing CFOs, hiring, wages and headcount appear to be the one of the more positive areas this quarter," said Marie Hollein, President and CEO, Financial Executives International. "A good percentage of CFOs have plans to hire and more importantly, most have not been forced to make severe headcount reductions. So far, their macro-economic concerns have not impacted the size of their workforce or their ability to hire new talent.”
Other survey highlights include:
- Cybersecurity: More than three quarters (78 percent) of U.S. CFOs stated that they considered increasing their company’s budgets in order to improve their cyber security, up from 67 percent who said they were making this consideration in Q4 2013.
- Interest Rates: The majority of CFOs (67 percent of U.S. CFOs and 50% of EU CFOs) forecast the Fed will raise interest rates in the first or second half of next year.
- Healthcare: On average, U.S. CFOs stated that their company has experienced a 6 percent increase in related costs as a result of the Patient Protection and Affordable Care Act in the past six months. This percentage of related costs is up from 4 percent a year ago.
Full survey results and historical data comparisons are available at
www.financialexecutives.org. The study is also available online at the Financial Executives Research Foundation bookstore and on the
Baruch College home page.