Role of the CFO

Most CFOs now see a softer recession ahead

Economic conditions will likely improve in the latter half of 2023, CFOs tell investors.
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· 4 min read

The flavor, timing, and length of a recession are still uncertain questions, but CEOs seem sure there is one coming, according to a recent EY study; 98% expect a global economic downturn in 2023. What they’re divided on is how severe a downturn might be.

“We’re in this interesting moment where there is no question the macroeconomic situation is iffier than it’s been in quite some time,” McKinsey CFO Eric Kutcher told CFO Brew. “You’re dealing with uncertainty because of inflation, uncertainty because of geopolitics. And the most likely scenario is some level of economic slowdown.”

Yes, there are lots of either/or arguments to be had, lots of educated guesses to be made, but in the end the real question about recession for CFOs is: How does this affect us, and what should we be doing to prepare?

“What we’re seeing is that this new economic cycle hasn’t been like the past. And while everybody’s calling it a recession, potential recession—it’s not a traditional recession,” Vikas Agarwal, financial services risk and regulatory leader at PwC, told CFO Brew. “Everybody’s trying to figure out how to deal with that. And that definitely requires better tools, more coordination from finance and business teams.”

Overall, CFOs, much like CEOs, are still fairly pessimistic about economic conditions. As recently as December, fewer than 10% of CFOs surveyed by CNBC expected a “soft landing” recession in 2023.

But there are a few glimmers of optimism out there. A recent Grant Thorton survey found that in the fourth quarter of 2022, CFO optimism about the US economy rose to 45%, a slight increase from Q2 22. Deloitte’s 4Q22 CFO Signals report found that 29% of CFOs surveyed believed that economic conditions would improve in North America in a year.

“I would argue there is optimism, but with a little healthy dose of cautiousness because they recognize it’s a little bit less stable than it’s been,” said Kutcher.

That optimism that economic conditions may improve has started to show up in recent earnings calls. CFO Brew took a deep dive into earnings calls in recent weeks to see what CFOs are saying about recession in the coming months.

  • David Zinzer, CFO, Intel: “We see potential for market conditions to improve faster than typical seasonality as third-party data shows macro headwinds easing in the second half of the year…While we’re not satisfied with near-term results, this market downturn represents an opportunity to accelerate the transformation necessary to achieve our long-term goals.”
  • Rob Reilly, CFO, PNC Financial: “In regard to our view of the overall economy, we’re now expecting a mild recession in 2023, resulting in a 1% decline in real GDP.”
  • Monish Patolawala, CFO, 3M: “If you also look at external data—and that’s what we can look at because none of us are able to predict the future—external data says the second half gets better…And that’s another reason why we are hopeful that as volumes come back in the second half, we should see our own margins go up and our own revenue go up.”
  • Harmit Singh, CFO, Levi Strauss: “As we look forward, we are confident in our strategies and continue to expect profitable growth in 2023. That said, we acknowledge there’s still a lot of macro uncertainties and have assumed caution in our outlook. We do, however, expect additional tailwinds in the second half as we lap higher product costs and the stronger dollar…The way we’re thinking about the year, folks, is [what] we’re thinking about is the tale of two halves, where the first half is weaker than the second half.”
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No matter what economic situation turns out to be in 2023, this is still a time of opportunity for business, Kutcher told CFO Brew.

“If we want to use this moment to come out stronger, we have to put our foot on the accelerator in some parts. But we probably have to re-allocate away from things that we know aren’t working,” he said. “These moments create a unique opportunity to probably do that better and faster than we’ve done in the past.”—DA

Correction 02/01/2023: This story has been updated since publication to more accurately reflect the survey results on CFOs’ opinions about economic conditions in North America.

News built for finance pros

CFO Brew helps finance pros navigate their roles with insights into risk management, compliance, and strategy through our newsletter, virtual events, and digital guides.