CFOs reduce outlook for growth in the coming year

Despite CFOs reassuring investors that they would be able to “meet their strategic growth goals in 2023 despite anticipating a recession,” the Richmond Fed has come out with a much gloomier survey just in time for the Halloween season that pointed to…the exact opposite: Finance executives are reducing their outlook for growth.

The survey, which polled around 300 CFOs, found that finance executives were concerned about inflationary and labor headwinds and are scaling back their growth projections into 2023.

“More than 80% of firms expect cost pressures to persist into next year, and around a third expect these pressures to last longer than a year,” Atlanta Fed economist Brent Meyer wrote in the news release. “It’s not surprising to see real GDP growth expectations decrease in a time of heightened uncertainty when supply issues are persistent.”

The Fed’s survey stands in stark contrast to others released late this summer—in August, CFOs were beginning to see “positive signs in the economy,” and a whopping 83% of more than 700 executives surveyed by PwC said they were focusing on growth. That’s not necessarily to say that finance chiefs weren’t being forthcoming; they might not have made up their minds at that point. Deloitte wrote in its Q3 CFO Signals report that “like the broader economy, CFOs who participated…are sending out mixed signs,” as fewer than half, or 46%, said they expected the North American economy to be in a recession by 2023.

Have the leaves changed their colors? If the Richmond Fed survey is any indicator, perhaps. Optimism about the US economy dropped to 53.1%, lower than in March 2020 (50.9%) and CFOs reported that they “expect real GDP to grow 0.9% over the next 12 months, down from an expectation of 1.5% last quarter.” And the probability of negative GDP growth rose to 30% over the next 12 months.

Like most surveys and headlines, inflation topped the list as CFOs “most pressing concern,” followed by labor quality/availability coming in second and supply chain concerns in third place, but down from Q2 results.

The survey also featured questions specific to this quarter that asked finance chiefs if their businesses were being hit with larger than normal costs, to which 52.5% said the majority of their costs were being affected.

Big gulp: And some of the extra weight will be handed off to the consumer; firms indicated in the survey “that they are able to pass a larger chunk of those cost increases on via price increases than they were” at the end of last year. —KT