Category Archives: Executive Surveys

“CFO Signals” Report – Excerpts

Recently Deloitte released their “CFO Signals” “High-Level Summary” report for the 3rd Quarter of 2017.

As seen in page 2 of the report, there were 160 survey respondents.  As stated:  “Each quarter (since 2Q10), CFO Signals has tracked the thinking and actions of CFOs representing many of North America’s largest and most influential companies.

All respondents are CFOs from the US, Canada, and Mexico, and the vast majority are from companies with more than $1 billion in annual revenue. For a summary of this quarter’s response demographics, please see the sidebars and charts on this page. For other information about participation and methodology, please contact [email protected].”

Here are some of the excerpts that I found notable:

from page 3:

Perceptions

How do you regard the current/future status of the North American, Chinese, and European economies? Perceptions of North America declined, with 64% of CFOs rating current conditions as good (still high), and 45% expecting better conditions in a year (down from 58% last quarter). Perceptions of Europe rose to 29% and 32%; China was flat at 32% and 30%. Page 6.

What is your perception of the capital markets? Eighty-three percent of CFOs say debt financing is attractive (down slightly from 85%). Attractiveness of equity financing rose for public company CFOs (from 42% to 48%) and decreased for private company CFOs (from 46% to 35%). Eighty-three percent of CFOs now say US equities are overvalued—a new survey high. Page 7.

Sentiment

Overall, what risks worry you the most? CFOs voice growing concerns about US political turmoil and geopolitical conflict; talent challenges again top CFOs’ internal worries, and technological change is a rising concern. Page 8.

Compared to three months ago, how do you feel about the financial prospects for your company? The net optimism index declined from last quarter’s +44 to +29 this quarter. About 45% of CFOs express rising optimism (down from 55%), and 16% express declining optimism (up from 11%). Page 9.

Expectations

What is your company’s business focus for the next year? CFOs indicate a strong bias toward revenue growth over cost reduction (60% vs. 20%) and investing cash over returning it (56% vs. 14%). They shifted back to a bias toward new offerings over existing ones (42% vs. 34%), and indicated a bias toward current geographies over new ones (62% vs. 19%). Page 10.

Compared to the past 12 months, how do you expect your key operating metrics to change over the next 12 months? Revenue growth expectations remain above the two-year average at 5.7% (up from 5.6% last quarter). Earnings growth slid from 8.7% to 7.9%, but remains above the two-year average. Capital spending growth fell from 9.0% to 7.3%, while domestic hiring growth rose from 2.1% to 2.6%. US CFOs trailed in almost all metrics. Page 11.

from page 9:

Sentiment

Coming off a survey high two quarters ago, optimism continued to decline— largely on growing pessimism in the US; Healthcare/Pharma and Technology improved, but Manufacturing and

(Please note that all responses were collected prior to Hurricane Harvey.)

This quarter’s net optimism declined significantly from last quarter’s +44 to a stillstrong +29. About 45% of CFOs expressed rising optimism (down from 55%), and 16% cited declining optimism (up from 11%).

Net optimism for the US declined sharply from last quarter’s +47 to +28 this quarter. Canada rose from +20 to +31, while optimism in Mexico declined from +50 to +39.

Healthcare/Pharma optimism rose sharply from +33 to +57, and Technology rose from +27 to +46. On the other hand, Manufacturing optimism fell sharply from +52 to +22, and Energy/Resources fell from +47 to just +19.

Please see the appendix for charts specific to individual industries and countries.

from page 11:

Expectations

Growth in key metrics, year-over-year

Bolstered by Canada and Mexico, domestic hiring surged and other metrics remain strong.

Earnings growth declined to 7.9% from last quarter’s 8.7%. The US declined but remained above its two-year average. Canada declined but remains strong. Mexico sits at its highest level in a year. Energy/Resources and Technology lead; Healthcare/Pharma and T/M/E trail.

Capital investment growth fell to 7.3% from 9.0%, still among its five-year highs. The US declined but remains above its two-year average. Canada declined but remains strong.  Mexico fell below its two-year average.  Energy/Resources, Healthcare/Pharma, and Financial Services are highest; Services, Technology, and Manufacturing are lowest.

Domestic hiring growth spiked to 2.6% from 2.1%. Canada hit its second-highest level in three years. Mexico rose to its highest level in a year. The US trails but hit its highest level in two years. Technology and Retail/Wholesale lead, while Healthcare/Pharma and Manufacturing trail. Wage pressures are evident in Mexico.

Please see the appendix for charts specific to individual industries and countries.

Among the various charts and graphics in the report are graphics depicting trends in “Own Company Optimism” on page 9 and “Economic Optimism” found on page 6.

_____

RevSD, LLC offers the above commentary for informational purposes only, and does not necessarily agree with the views expressed by these outside parties.

—–

RevSD, LLC (revsd.com) is a management consulting firm and strategic advisory that focuses on the analysis of current and future weak(ening) economic conditions, and offers businesses and other entities advice, strategies, and actionable methods on how to optimally adapt to such challenging, complex conditions.

“CFO Signals” Report – Excerpts

Recently Deloitte released their “CFO Signals” “High-Level Summary” report for the 2nd Quarter of 2017.

As seen in page 2 of the report, there were 132 survey respondents.  As stated:  “Each quarter (since 2Q10), CFO Signals has tracked the thinking and actions of CFOs representing many of North America’s largest and most influential companies.

All respondents are CFOs from the US, Canada, and Mexico, and the vast majority are from companies with more than $1 billion in annual revenue. For a summary of this quarter’s response demographics, please see the sidebars and charts on this page. For other information about participation and methodology, please contact [email protected].”

Here are some of the excerpts that I found notable:

from page 3:

Perceptions

How do you regard the current/future status of the North American, Chinese, and European economies? Perceptions of North America declined slightly, with 65% of CFOs rating current conditions as good (near the four-year high) and 58% expecting better conditions in a year. Perceptions of Europe improved to 17% and 30%, while China rose strongly to 28% and 32%. Page 6.

What is your perception of the capital markets? Eighty-five percent of CFOs say debt financing is attractive (up from 81% last quarter), while attractiveness of equity financing held steady for public company CFOs (at 42%) and rose for private company CFOs (from 38% to 46%). Seventy-eight percent of CFOs now say US equities are overvalued—just below last quarter’s survey high. Page 7.

Expectations

What is your company’s business focus for the next year? CFOs indicate a strong bias toward revenue growth over cost reduction (63% vs. 18%), and investing cash over returning it (62% vs. 16%). They shifted back to a bias toward existing offerings over new ones (46% vs. 32%), and again increased their bias toward current geographies over new ones (72% vs. 14%). Page 10.

Compared to the past 12 months, how do you expect your key operating metrics to change over the next 12 months? Revenue growth expectations rose from 4.3% to 5.6% and are above their two-year average. Earnings growth rose to 8.7%, up from 7.3% and well above the two-year average. Capital spending growth, which skyrocketed last quarter, slipped from 10.5% to a still high 9.0%. Domestic hiring growth held steady at 2.1%. Page 11.

from page 9:

Sentiment

Coming off a survey high last quarter, own-company optimism remains strong on very high optimism in the US and Mexico; Manufacturing and Services are high, and Energy/Resources rebounded.

This quarter’s net optimism declined from last quarter’s survey-high +50 to a still-high +44. Nearly 55% of CFOs expressed rising optimism (down from 60%), and 11% cited declining optimism (up from 10%).

Net optimism for the US declined from last quarter’s +58 to +47 this quarter. Canada fell from +40 to +20, while optimism in Mexico bounced back very strongly from -71 to +50.

Manufacturing and Services are again above +50, while Energy/Resources rose significantly to +47. Technology and Financial Services declined significantly, but both are still strong by historical standards. T/M/E is negative, but the sample size is very low this quarter.

Please see the full-detail report for charts specific to individual industries and countries.

from page 11:

Expectations

Key growth metrics remain relatively strong, bolstered by Canada and Mexico; the outlook for Energy/Resources and Healthcare/Pharma improved significantly.

Revenue growth expectations rose from 4.3% to 5.6% and are above their two-year average. US expectations continued to rise. Canada rose to a five-year high and Mexico bounced back from a two-year low. Energy/Resources rose to its survey high, and Healthcare/Pharma bounced back from last quarter’s survey low.

Earnings growth expectations are up to 8.7% from last quarter’s 7.3% and hit a twoyear high. All geographies improved significantly. Manufacturing is at its highest level in two years; Healthcare/Pharma bounced back strongly from last quarter’s three-year low.

Capital investment growth expectations fell to 9.0% from 10.5%, but still sit at their secondhighest level in five years. Canada and Mexico nearly doubled, but US expectations fell. Energy/Resources is again near its survey high. Healthcare/Pharma and Services are both up sharply; Technology declined significantly.

Domestic hiring growth held steady at 2.1%.  Canada bounced back from last quarter, and the US declined slightly. Healthcare/Pharma is highest of the industries, with Manufacturing the lowest (despite sitting near its two-year high).

Among the various charts and graphics in the report are graphics depicting trends in “Own Company Optimism” on page 9 and “Economic Optimism” found on page 6.

_____

RevSD, LLC offers the above commentary for informational purposes only, and does not necessarily agree with the views expressed by these outside parties.

—–

RevSD, LLC (revsd.com) is a management consulting firm and strategic advisory that focuses on the analysis of current and future weak(ening) economic conditions, and offers businesses and other entities advice, strategies, and actionable methods on how to optimally adapt to such challenging, complex conditions.

“CFO Signals” Report – Excerpts

Recently Deloitte released their “CFO Signals” “High-Level Summary” report for the 1st Quarter of 2017.

As seen in page 2 of the report, there were 132 survey respondents.  As stated:  “Each quarter (since 2Q10), CFO Signals has tracked the thinking and actions of CFOs representing many of North America’s largest and most influential companies. All respondents are CFOs from the US, Canada, and Mexico, and the vast majority are from companies with more than $1 billion in annual revenue. For a summary of this quarter’s response demographics, please see the sidebars and charts on this page. For other information about participation and methodology, please contact [email protected]

Here are some of the excerpts that I found notable:

from page 3:

Perceptions

How do you regard the current/future status of the North American, Chinese, and European economies? Perceptions of the North American economy improved again, with 66% of CFOs rating current conditions as good (a four-year high) and 62% expecting better conditions in a year. Perceptions of Europe improved to 12% and 28%, while China rose to 20% and 19%. Page 6.

What is your perception of the capital markets? Eighty-one percent of CFOs say debt financing is attractive (up slightly from 79% last quarter), while attractiveness of equity financing held steady for public company CFOs (at about 40%) and rose for private company CFOs (from 29% to 38%). Eighty percent of CFOs now say US equities are overvalued—a new survey high. Page 7.

Sentiment

Compared to three months ago, how do you feel about the financial prospects for your company? Net optimism rose sharply from last quarter’s +23.4 to +50.0 (a survey high). About 60% of CFOs express rising optimism (up from 43%), and those citing declining optimism fell from 20% to 10%. Page 8.

Expectations

What is your company’s business focus for the next year? CFOs indicate a strong bias toward revenue growth over cost reduction (60% vs. 18%), and investing cash over returning it (59% vs. 15%). They shifted to a bias toward new offerings over existing ones (42% vs. 38%), and markedly increased their bias toward current geographies over new ones (67% vs. 13%). Page 9.

Compared to the past 12 months, how do you expect your key operating metrics to change over the next 12 months? Revenue growth expectations rose from 3.7% to 4.3% and are slightly above their two-year average. Earnings growth rose to 7.3%, up from 6.4% and also above the two-year average. Capital spending growth skyrocketed from 3.6% to 10.5% (the highest level in almost five years). Domestic hiring growth rose from 1.3% to 2.1%. Page 10.

from page 8:

Sentiment

Net optimism—already fairly strong since 2Q16—rose sharply to a new survey high amid overwhelmingly positive sentiment among US CFOs.

This quarter’s net optimism spiked to a survey high +50. Nearly 60% of CFOs expressed rising optimism (up from 43% last quarter), and about 10% cited declining optimism (down from 20%).

Net optimism for the US rose sharply from last quarter’s already-strong +34 to +58 this quarter. Canada rose from +7 to +40, while optimism in Mexico slid from -64 to -71.

Healthcare/Pharma and Energy/Resources CFOs were among the most optimistic last quarter, but are among the least optimistic this quarter (joined by Retail/Wholesale). Financial Services CFOs were among the least optimistic last quarter, but are among the most optimistic this quarter, joined by Technology and Telecom/Media/Entertainment (T/M/E).

from page 10:

Expectations

All key growth metrics rose this quarter, with capital spending skyrocketing; the outlook for Healthcare/Pharma declined markedly, but the outlook for Manufacturing and Energy/Resources improved.

Revenue growth expectations rose to 4.3% and are slightly above their two-year average. US expectations rebounded from last quarter’s dismal level, while Mexico fell to a two-year low. Energy/Resources is near its two-year high, and Healthcare/Pharma fell to its survey low.

Earnings growth expectations of 7.3% are up significantly from last quarter and above their two-year average. The US improved, but Mexico declined again. Manufacturing is highest, hitting its highest level in two years; Healthcare/Pharma fell to its lowest level in more than three years.

Capital investment growth expectations of 10.5% are up drastically from last quarter and sit at their highest level in nearly five years. All countries improved significantly from last quarter. Manufacturing and Energy/Resources rose sharply, with both near their survey highs.

Domestic hiring growth rose from last quarter’s weak showing of 1.3% to 2.1% and is at its second-highest level in nearly two years. Canada is low, but up from last quarter. Manufacturing sits at a two-year high, but is lowest of the industries (despite strength in other metrics).

Among the various charts and graphics in the report are graphics depicting trends in “Own Company Optimism” on page 8 and “Economic Optimism” found on page 6.

_____

RevSD, LLC offers the above commentary for informational purposes only, and does not necessarily agree with the views expressed by these outside parties.

—–

RevSD, LLC (revsd.com) is a management consulting firm and strategic advisory that focuses on the analysis of current and future weak(ening) economic conditions, and offers businesses and other entities advice, strategies, and actionable methods on how to optimally adapt to such challenging, complex conditions.

“CFO Signals” Report – Excerpts

Recently Deloitte released their “CFO Signals” “High-Level Summary” report for the 4th Quarter of 2016.

As seen in page 2 of the report, there were 137  survey respondents.  As stated:  “Each quarter (since 2Q10), CFO Signals has tracked the thinking and actions of CFOs representing many of North America’s largest and most influential companies. All respondents are CFOs from the US, Canada, and Mexico, and the vast majority are from companies with more than $1 billion in annual revenue. For a summary of this quarter’s response demographics, please see the sidebars and charts on this page. For other information about participation and methodology, please contact [email protected]

Here are some of the excerpts that I found notable:

from page 3:

Perceptions

How do you regard the current/future status of the North American, Chinese, and European economies? Perceptions of North America have improved, with 43% of CFOs rating its economic health as good and 58% expecting improvement next year. Perceptions of Europe remain pessimistic at just 8% and 13%, while China rebounded slightly to 24% and 17%. Page 6.

What is your perception of the capital markets? Seventy-nine percent of CFOs say debt financing is attractive (down from 89% last quarter), while attractiveness of equity financing held steady for public company CFOs (at about 40%) and rose for private company CFOs (from 24% to 29%). Seventy percent of CFOs say US equities are overvalued—just under the survey high. Page 7.

Sentiment

Overall, what risks worry you the most? CFOs again mention global economic growth and government regulation. New for this quarter is uncertainly regarding the new US administration’s future actions, with CFOs voicing concerns about the possibility of protectionism hurting global trade, and about tax reform possibly slowing near-term business spending. Page 8.

Compared to three months ago, how do you feel now about the financial prospects for your company? This quarter’s net optimism rose from last quarter’s +19.7 to +23.4 (slightly above the two-year average). Forty-three percent of CFOs express rising optimism (up from 35%), and the proportion citing declining optimism rose from 16% to 20%. Page 9.

Expectations

What is your company’s business focus for the next year? CFOs indicate a bias toward revenue growth over cost reduction (45% vs. 31%), and investing cash over returning it (56% vs. 17%). CFOs again indicate a bias toward existing offerings over new ones (41% vs. 32%), current geographies over new ones (57% vs. 22%), and organic growth over inorganic (58% vs. 18%). Page 10.

Compared to the past 12 months, how do you expect your key operating metrics to change over the next 12 months? Revenue growth expectations fell from 4.2% to 3.7% and are near their survey lows. Earnings growth rose to 6.4%, above last quarter’s 6.1% but again near 1Q16’s survey-low 6.0%. Capital spending growth fell to 3.6% (well off the two-year average). Domestic hiring growth fell to 1.3% from 2.3%. Page 11.

from page 9:

Sentiment

Net optimism bounced back strongly over the last two quarters; this quarter’s net optimism rose again due to positive sentiment within the US.

This quarter’s net optimism remains strong at +23.4. Forty-three percent of CFOs expressed rising optimism (up from 35% last quarter), and 20% cited declining optimism (up from 16%).

Net optimism for the US rose sharply from last quarter’s +16 to +34 this quarter. Canada fell from +50 to +7, and optimism in Mexico fell sharply from +50 to -64.

Healthcare/Pharma, Telecom/Media/ Entertainment, and Energy/Resources are the most optimistic; Retail/Wholesale and Financial Services are the least.

from page 11:

Expectations

Key growth metrics remain near their survey lows. CFOs from the US and from the Financial Services and Retail/Wholesale industries weighed on the averages.

Revenue growth expectations of 3.7% are down from last quarter and are again among the lowest in the survey’s history. US expectations are the second-lowest in survey history (back to 2Q10), and Financial Services sits at its new survey low.

Earnings growth expectations of 6.4% are up slightly from last quarter, but still near their survey low. Healthcare/Pharma and Energy/Resources are the highest; Financial Services is lowest.

Capital investment growth expectations of 3.6% are down sharply from last quarter and are the second-lowest in survey history. The US came in at its second-lowest level. Retail/Wholesale expects negative growth, with about half of CFOs expecting a decline.

Domestic hiring growth fell from last quarter’s very strong showing of 2.3% to 1.3% and is slightly below its two-year average. Technology and Healthcare/Pharma are lowest.

Among the various charts and graphics in the report are graphics depicting trends in “Own Company Optimism” on page 9 and “Economic Optimism” found on page 6.

_____

RevSD, LLC offers the above commentary for informational purposes only, and does not necessarily agree with the views expressed by these outside parties.

—–

RevSD, LLC (revsd.com) is a management consulting firm and strategic advisory that focuses on the analysis of current and future weak(ening) economic conditions, and offers businesses and other entities advice, strategies, and actionable methods on how to optimally adapt to such challenging, complex conditions.

“CFO Signals” Report – Excerpts

Recently Deloitte released their “CFO Signals” “High-Level Summary” report for the 3rd Quarter of 2016.

As seen in page 2 of the report, “One hundred twenty-two CFOs responded during the two-week period ending August 19. Seventy-three percent of respondents are from public companies, and 80% are from companies with more than $1B in annual revenue. For more information, please see the “About the survey” section of this report.”

Here are some of the excerpts that I found notable:

from page 3:

Perceptions

How do you regard the current and future status of the North American, Chinese, and European economies? Forty-six percent of CFOs describe the North American economy as good or very good (up from 40% last quarter), and 37% expect better conditions in a year (down from 39%). Ten percent regard China’s economy as good (up from 9% last quarter), and 14% expect improvement (up from 10%). In the aftermath of the Brexit vote, just 4% describe Europe’s economy as good (down from 6%), and only 10% see it improving in a year (down from 15%). Page 8.

What is your perception of the capital markets? Seventy-one percent of CFOs say US equity markets are overvalued (up substantially from 56% last quarter and a new survey high). Eighty-nine percent say debt is currently an attractive financing option (up from 80%), and 42% of public company CFOs view equity financing favorably (up from 30% last quarter). Page 9.

Expectations

Compared to the past 12 months, how do you expect your key operating metrics to change over the next 12 months?* Revenue growth expectations rose slightly from last quarter’s 4.0% to 4.2%, but are still among their survey lows. Earnings growth expectations declined to 6.1%, well off last quarter’s 7.7% and near 1Q16’s survey low. Capital spending expectations, having increased sharply last quarter from 1Q16’s survey-low 1.7% to 5.4%, rose slightly to 5.6% this quarter. Domestic hiring growth expectations rose significantly to 2.3% from last quarter’s 1.1%. Pages 11-13.

Sentiment

Compared to three months ago, how do you feel now about the financial prospects for your company? This quarter’s net optimism declined from last quarter’s +30.0 to a still-strong +19.7, marking the fifteenth consecutive netpositive reading. Thirty-five percent of CFOs express rising optimism (down from 49% last quarter), and the proportion citing declining optimism fell from 19% to 16%. Page 14.

Overall, what risks worry you the most? CFOs mention global economic stagnation, low interest rates, a strong dollar, and regulatory uncertainty— concerns that appear amplified by worries about Brexit, US elections, and the tenor of geopolitics worldwide. Page 15.

Special topic: Business environment

How much are macroeconomic factors affecting your business planning? Nearly 90% of CFOs say low interest rates are significantly impacting their business planning, and more than 80% say the same for a strong US dollar. About 70% cite impacts from slow European growth, and nearly 65% cite slow Chinese growth. Fifty-seven percent cite impacts from both the upcoming US elections and the UK’s Brexit vote. Page 16.

*Averages are means that have been adjusted to eliminate the effects of stark outliers.

from page 4:

Mixed sentiment and expectations

This quarter’s net optimism1 of +19.7 is down from last quarter’s +30.0 (which came after a dismal +1.7 in the first quarter), but it still indicates considerable strength. Sentiment is net-positive across all industries except Retail/Wholesale, with Manufacturing and Technology indicating particular strength.

Despite this optimism, CFOs’ expectations for revenue, earnings, capital spending, and domestic hiring growth are mixed. This quarter’s 4.2%* expectation for yearover-year revenue growth is up from last quarter’s 4.0%* and from 3.3%* the quarter before that, but it is still among the lowest in the survey’s history. Similarly, this quarter’s earnings growth expectation of 6.1%* is barely above 1Q16’s survey-low 6.0%* and is well off last quarter’s 7.7%*.

On a more positive note, capital investment growth expectations, which bottomed out at just 1.7%* in 1Q16, rose to 5.4%* last quarter and to 5.6%* this quarter—well above the 4.7%* average over the past two years. Similarly, this quarter’s domestic hiring growth expectation of 2.3%* is well above the 1.1% to 1.4% levels we have seen over the last year and a half (and 1Q16’s low of 0.6%).

*Averages are means that have been adjusted to eliminate the effects of stark outliers.

¹ Net optimism is calculated as the difference between the proportions of those expressing rising and falling optimism. Accordingly, this metric does not explicitly account for the level of “no change” responses.

from page 11:

Revenue and earnings

Revenue[1]

Expectations remain among their survey lows; weakness is again evident across nearly all industries, but Energy/Resources continued to improve:

Other than one optimistic quarter in 4Q15, revenue growth has been on a downward trend since 2Q15 and come in at or near survey lows. This quarter’s 4.2% is up from last quarter’s 4.0% and from 3.3% the quarter below that, but it is still among the lowest in the survey’s history. The median this quarter repeated at 4.0%, and 83% of CFOs expect year-over-year gains (considerably up from the last two quarters). The distribution2 of this quarter’s responses is the lowest in almost two years.

Country expectations (this quarter/last quarter): US 3.9%/3.7%; Canada 6.2%/3.1%; Mexico 8.0%/8.6%.

Industry expectations (this quarter): Highest are T/M/E (8.0%) and Healthcare/Pharma (6.0%); lowest are Services (0.9%) and Manufacturing (2.8%).

Earnings1

Expectations declined across all geographies; Retail/Wholesale showed strength, while Financial Services came in near its survey low:

Earnings expectations have mostly been trending downward since the survey was launched in 2Q10. This quarter’s earnings growth expectations came in at 6.1%, barely above the 1Q16 survey low of 6.0% and well off of last quarter’s 7.7%. The median fell from 7.0% to 5.0%, and the percentage of CFOs expecting year-overyear gains rose from 76% last quarter to 81%. The distribution2 of responses was well below the average for this metric.

Country expectations (this quarter/last quarter): US 6.2%/7.3%; Canada 3.8%/9.4%); Mexico 8.5%/9.7%.

Industry expectations (this quarter): Highest are Retail/Wholesale (10.4%) and T/M/E (7.5%); lowest are Services (3.2%) and Financial Services (4.2%); notable is Healthcare/Pharma (5.7%, down from 10.9%).

[1] All averages have been adjusted to eliminate the effects of stark outliers.

[2] “Distribution” refers to the spread of the middle 90% of responses.

from page 13:

Domestic and offshore hiring

Domestic hiring[1]

Expectations rebounded with several industries showing significant improvement:

Domestic hiring expectations have been around 1.2% since 2Q15 and bottomed out in 1Q16 at 0.6%. This quarter’s 2.3% breaks that trend and is well up from last quarter’s 1.1%. The median remained 1.0%, and the proportion of CFOs expecting gains declined slightly from 55% to 53% (about even with the survey average). The distribution2 of responses is among the lowest for this metric.

Country expectations (this quarter/last quarter): US 1.9%/0.9% (secondlowest level in three years); Canada 4.8%/0.9%; Mexico 7.0%/3.9%.

Industry expectations (this quarter): Highest are T/M/E (7.3%), Healthcare/Pharma (3.6%), and Technology (3.3%); lowest are  Manufacturing (1.0%), Energy/Resources (1.3%), and Services (2.1%).

Offshore hiring1

Expectations remain near their three-year low:

Offshore hiring growth expectations fell markedly in 1Q16 and have stayed low since then. This quarter’s 1.9% is only slightly up from last quarter’s three-year-low of 1.8%. The median remains at 0.0%, and 43% of CFOs expect gains (up from last quarter’s 39%).

Country expectations (this quarter/last quarter): US 1.9%/1.9%; Canada 1.1%/0.0%; Mexico 4.5%/1.6%.

Industry expectations (this quarter): Highest is Technology (4.1%); lowest are Energy/Resources (0.5%) and Manufacturing (1.3%).

Domestic wage growth1

Expectations down somewhat, but still comparatively high:

Domestic wage growth declined to 2.7% from last quarter’s 3.1%. The median held at 3.0%, and 97% of CFOs expect gains.

Country expectations (this quarter/last quarter): US 2.7%/3.1%; Canada 2.6%/2.2%; Mexico 4.3%/4.6%.

Industry expectations (this quarter): Highest is T/M/E (4.0%); lowest are Energy/Resources (2.3%) and Manufacturing (2.6%).

[1] All averages have been adjusted to eliminate the effects of stark outliers.

[2] “Distribution” refers to the spread of the middle 90% of responses.

from page 15:

Most worrisome risks

External concerns

Rising concerns about the tenor and potential economic impact of geopolitics—especially in Europe and the US: 

Heightened election and policy concerns: Regulatory concerns are again strong and industry dependent. US election worries skyrocketed last quarter and increased this quarter (again with concerns around international trade and tax policy). Concerns about the tenor of the worldwide political environment rose sharply.

Concerns about broader global economic performance: For several quarters, including this one, CFOs’ concerns have appeared to be shifting from a specific focus on Europe and China to a more generalized focus on global economic stagnation and volatility.

Moderating concerns about the US economy: Perhaps influenced by equity and real estate markets that are near all-time highs, strengthening consumer sentiment, and mostly positive economic news this quarter, CFOs’ concerns about the US economy appeared to decline. Still, rising concerns about political and policy uncertainty and lagging business spending suggest CFOs see potential risks to future US economic performance.

Less concern about capital markets; more about interest rates: With equity markets having recovered strongly, concerns about financial market risk appear to have declined. Concerns about a strong dollar and global debt levels also decreased, but concerns about interest rates (the possibility of rate increases and the longterm impacts of continuing low rates) rose sharply.

Falling commodity price worries: After climbing sharply over the last two quarters, worries about oil and other commodity prices fell significantly this quarter.

Internal concerns

Talent again the top internal challenge:

Consistent talent challenges: Concerns around securing and retaining key personnel continued this quarter, as did those related to leadership succession.

Escalating growth and execution concerns: CFOs again voiced concerns about executing their growth initiatives, innovating, and executing against their strategies and plans.

Among the various charts and graphics in the report are graphics depicting trends in “Own Company Optimism” and “Economic Optimism” found on page 6.

_____

RevSD, LLC offers the above commentary for informational purposes only, and does not necessarily agree with the views expressed by these outside parties.

—–

RevSD, LLC (revsd.com) is a management consulting firm and strategic advisory that focuses on the analysis of current and future weak(ening) economic conditions, and offers businesses and other entities advice, strategies, and actionable methods on how to optimally adapt to such challenging, complex conditions.

“CFO Signals” Report – Excerpts

Recently Deloitte released their “CFO Signals” “High-Level Summary” report for the 2nd Quarter of 2016.

As seen in page 2 of the report, “One hundred forty CFOs responded during the two-week period ending May 20. Seventy-two percent of respondents are from public companies, and 78% are from companies with more than $1B in annual revenue. For more information, please see the “About the survey” section of this report.”

Here are some of the excerpts that I found notable:

from page 3:

How do you regard the current and future status of the North American, Chinese, and European economies? Forty percent of CFOs describe the North American economy as good or very good (41% last quarter), and 39% expect better conditions in a year (up from 35% last quarter). Nine percent regard China’s economy as good (same as last quarter), and 10% expect improvement (down from 11%). Six percent describe Europe’s economy as good (up from 5%), and only 15% see it improving in a year (down from 17%). Page 8.

What is your perception of the capital markets? Fifty-six percent of CFOs say US equity markets are overvalued (up dramatically from 30% last quarter). Eighty percent say debt is currently an attractive financing option (up from 68%), and 30% of public company CFOs view equity financing favorably (up from 22% last quarter). Page 9.

Compared to the past 12 months, how do you expect your key operating metrics to change over the next 12 months?* Revenue growth expectations rose from 3.3% to 4.0%, but are still among their survey lows. Earnings growth expectations rose to 7.7% from last quarter’s survey-low 6.0%. Capital spending expectations rebounded strongly from last quarter’s survey-low 1.7% to 5.4%. Domestic hiring growth expectations rose to 1.1% from last quarter’s survey-low 0.6%. Pages 11-13.

*Averages are means that have been adjusted to eliminate the effects of stark outliers.

from page 4:

Better (but not good) expectations

This quarter’s net optimism¹ of +30.0 marks a sharp reversal from declining sentiment that left last quarter’s measure at +1.7—the lowest level in more than three years. Sentiment is net-positive across all industries, with both Manufacturing and Energy/Resources posting significantly more optimism than they did last quarter. Consistent with this reversal, CFOs’ expectations for revenue, earnings, capital spending, and domestic hiring all rebounded from last quarter’s mostly dismal levels. But the gains for some metrics were modest. Revenue growth expectations, for example, rose from last quarter’s 3.3%* to 4.0%,* but remain relatively low. Moreover, nearly all industries continue to show weakness, with Manufacturing again lowest. Similarly, earnings growth expectations rebounded from their survey-low 6.0%* last quarter to 7.7%*—better, but still well off the long-term average. All industries expect positive growth (with Energy/Resources and Healthcare/Pharma highest and Manufacturing improving), but most are still comparatively low. Domestic hiring growth expectations rose to 1.1%* from last quarter’s survey-low 0.6%,* but they are still relatively low as well. Energy/Resources, Manufacturing, and Services were all below 0.5%. Capital spending is the bright spot, rebounding strongly from last quarter’s survey-low 1.7%* to 5.4%*—the highest level since the second quarter of 2015. Expectations for Manufacturing improved, but Energy/Resources again lagged.

* Arithmetic means adjusted to eliminate the effects of stark outliers

from page 11:

Revenue and earnings

What are CFOs’ expectations for their companies’ year-over-year revenue and earnings?

Revenue¹

Expectations bounced back somewhat, but are still among their survey lows; weakness is again evident across nearly all industries:

• Last quarter’s revenue growth expectations were 3.3%, only slightly above the 2Q15 survey low of 3.1% and well below the prior quarter’s 5.9%. This quarter’s expectations improved to 4.0%, but are still among the lowest levels in the survey’s history. The median expectation rose from a survey-low 3.0% to 4.0%, and just 72% of CFOs expect yearover-year gains (a new survey low). The distribution² of this quarter’s responses is among the widest on record.

• Country-specific expectations are 3.7% for the US (up from 3.3% last quarter), 3.1% for Canada (up from 2.2%), and 8.6% for Mexico (up from 4.5%).

• Industry expectations are mostly low, with Manufacturing lowest at 2.1% (up from 0.7% last quarter) and Energy/Resources at 3.1% (even with last quarter). Technology and T/M/E are the only industries above 6%, at 6.7% and 6.9%, respectively.

Earnings¹

Expectations improved across all geographies and recorded a substantial rebound in Manufacturing:

• This quarter’s earnings growth expectations came in at 7.7%, significantly above last quarter’s survey-low 6.0%. The median rebounded from 5.0% to 7.0%, but the percentage of CFOs expecting year-over-year gains fell from 79% last quarter to just 76%—a new survey low. The distribution² of responses was well above the two-year average.

• Country-specific expectations are 7.3% for the US (up from 6.4% last quarter), 9.4% for Canada (up from 4.2%), and 9.7% for Mexico (up from 3.1%).

• All industries expect positive growth, with Healthcare/Pharma and Energy/Resources highest at 11% and 10%, respectively. Manufacturing improved from 5% to 8%. Technology and Services are again comparatively low at around 6%.

[1] All averages have been adjusted to eliminate the effects of stark outliers.

[2] “Distribution” refers to the spread of the middle 90% of responses.

from page 13:

Employment

What are CFOs’ expectations for their companies’ year-over-year hiring?

Domestic hiring¹

Expectations rebounded to levels consistent with a year ago:

• Domestic hiring expectations rose to 1.1%, up from last quarter’s survey-low 0.6% and consistent with 2015 levels. The median rose from 0.0% to 1.0%, a bit above the survey average of 0.7%. The proportion of CFOs expecting gains rose from 47% to 55% and is back near the survey average. The distribution² of responses is about average compared to recent quarters.

• Country-specific expectations are 0.9% for the US (above last quarter’s 0.7%, but still at the second-lowest level in three years), 0.9% for Canada (up from – 0.9% last quarter), and 3.9% for Mexico (up from 2.7% last quarter).

• Technology, T/M/E, and Retail/Wholesale are highest at 3.2%, 2.7%, and 2.0%, respectively. Energy/Resources again indicated a contraction (-0.5%, which is about even with last quarter). Manufacturing and Services were also low, both with estimates below 0.5%.

Offshore hiring¹

Expectations declined and are again well below their long-term average:

• Offshore hiring growth fell to 1.8%, down slightly from last quarter’s 1.9% and the lowest level in three years. The median remains at 0.0%, and just 39% of CFOs expect year-over-year gains (down from last quarter’s 45%).

• Country-specific expectations are 1.9% for the US (up slightly from 1.8%), 0.0% for Canada (down from 2.8%), and 1.6% for Mexico (up from 0.4%).

• Technology again indicates the highest expectation at 4.0% (up from 3.4%), with Energy/Resources and Healthcare/Pharma the lowest at 0.0% and 0.5%, respectively.

Domestic wage growth¹

Expectations up significantly, possibly indicative of upward wage pressures:

• Domestic wage growth rose to 3.1%, up from last quarter’s 2.5%. The median held at 3.0%, and 96% of CFOs expect year-over-year gains.

• Country-specific expectations are 3.1% for the US (up from 2.5%), 2.2% for Canada (up from 2.1%), and 4.6% for Mexico (up from 4.1%).

• All industry-specific expectations are between 2.6% and 3.9% (versus 2.2% and 3.1% last quarter), with Energy/Resources and Healthcare/Pharma on the low end and Technology highest.

[1] All averages have been adjusted to eliminate the effects of stark outliers.

[2] “Distribution” refers to the spread of the middle 90% of responses.

Please see full report for industry-specific findings.

from page 15:

Most worrisome risks

Which external and internal risks do CFOs regard as most worrisome?

External concerns: Rising concerns about oil prices, the US economy, and politics:

Still-rising commodity price worries: After climbing significantly last quarter, worries about oil and other commodity prices continued to rise this quarter.

• Continuing concerns about broader global economic volatility: For the last two quarters, CFOs’ concerns appeared to shift from a specific focus on Europe and China to a more generalized focus on global economic stagnation and volatility. This trend largely continue this quarter, but was offset somewhat by rising concerns about the US economy.

• Sharply rising concerns about the US economy: Where last quarter’s rising concern was driven mostly by worries about the effects of struggling equity markets on consumer demand, this quarter’s rise appears driven by worries about US political and policy uncertainty as the 2016 elections approach.

• Sharply rising election and policy concerns: Regulatory concerns are again strong and industry dependent. US presidential election worries skyrocketed this quarter, with CFOs citing growing uncertainty around international trade, government spending, and tax policy.

• Declining concerns about financial markets: With equity markets having mostly recovered since last quarter’s survey, concerns about financial markets declined this quarter. Concerns about interest rates and a strong dollar continued, however, and worries about global debt levels (for both China and elsewhere) emerged as a growing concern.

Internal concerns: Rising concerns about growth

• Consistent talent challenges: Concerns around retention, an aging workforce, and leadership turnover continued this quarter.

• Escalating growth and execution concerns: CFOs voiced growing concerns about finding growth opportunities, executing their growth initiatives, innovating, and executing against their strategies and plans.

Among the various charts and graphics in the report are graphics depicting trends in “Own Company Optimism” and “Economic Optimism” found on page 6.

_____

RevSD, LLC offers the above commentary for informational purposes only, and does not necessarily agree with the views expressed by these outside parties.

—–

RevSD, LLC (revsd.com) is a management consulting firm and strategic advisory that focuses on the analysis of current and future weak(ening) economic conditions, and offers businesses and other entities advice, strategies, and actionable methods on how to optimally adapt to such challenging, complex conditions.

“CFO Signals” Report – Excerpts

Recently Deloitte released their “CFO Signals” “High-Level Summary” report for the 1st Quarter of 2016.

As seen in page 2 of the report, “One hundred eighteen CFOs responded during the two-week period ending February 19. Seventy-two percent of respondents are from public companies, and 83% are from companies with more than $1B in annual revenue. For more information, please see the “About the survey” section of this report.”

Here are some of the excerpts that I found notable:

from page 3:

How do you regard the current and future status of the North American, Chinese, and European economies? Forty-one percent of CFOs describe North American conditions as good (55% last quarter), and 36% expect better conditions in a year (47% last quarter). Nine percent regard China’s economy as good (down from 14% last quarter), and 11% expect improvement (down from 16%). Five percent describe Europe as good (down from 8%), and only 17% see it improving in a year (up from 15%). Page 8.

Compared to the past 12 months, how do you expect your key operating metrics to change over the next 12 months?* Revenue growth expectations fell from 5.9% to 3.3%, only slightly above the previous survey low from 2Q15. Earnings growth expectations fell from 8.3% to a new survey low of 6.0%. Capital spending expectations fell drastically from 4.9% to just 1.7%—eclipsing the previous survey low of 4.2% by a wide margin. Domestic hiring growth expectations declined sharply to just 0.6%, well off last quarter’s 1.2% and matching the survey low. Pages 11-13.

*Averages are means that have been adjusted to eliminate the effects of stark outliers.

from page 4:

Less confidence in North American economy

Behind these declining growth expectations are assessments of the North American economy that, having been a steadying influence for many quarters, now appear to be faltering. Assessments of current performance are still mostly positive, but confidence in the economy’s trajectory hit its lowest level in three years. Among their most worrisome risks, CFOs voiced growing concern about the toll economic and equity market volatility will take on liquidity and on consumers’ willingness to spend.

Meanwhile, CFOs’ confidence in Europe remains weak, and their assessment of China hit yet another low. Not surprisingly, CFOs this quarter indicated their highestever focus on current geographies over new ones (which, for most surveyed companies, means a continued focus on North American markets).

One potential bright spot in CFOs’ sentiment: for the first time since we began asking in 1Q15, and in sharp contrast to all prior quarters, more surveyed CFOs believe US equity markets are undervalued than overvalued. (Note that the S&P 500 index averaged 1865 while the survey was open, but has since rebounded to about 2010, or by almost 8%).

from page 11:

Revenue and earnings

What are CFOs’ expectations for their companies’ year-over-year revenue and earnings?

Revenue[1]

Expectations fell back toward their 2Q15’s record lows, driven by weakness across all regions and nearly all industries:

  • After rebounding from their 2Q15 survey-low 3.1% over the past two quarters, revenue growth expectations fell from 5.9% last quarter to just 3.3% this quarter. The median fell from 5.0% to 3.0%—a new survey low. Just 78% of CFOs expect year-over-year gains, matching the survey low. The distribution[2] of this quarter’s responses is narrow compared to last quarter and most recent quarters.
  • Country-specific expectations are 3.3% for the US (down from 6.3% last quarter), 2.2% for Canada (down from 2.8%), and 4.5% for Mexico (down from 7.4%).
  • Industry expectations are mostly very low, with Manufacturing lowest at just 0.7% and Services at just 1.4%. Energy/Resources rose slightly from 2.8% last quarter to 3.1% this quarter. All industries other than T/M/E were 4.4% or lower.
Earnings1

Expectations reversed recent gains and now sit at their survey low driven largely by weakness in Manufacturing and Financial Services:

  • After rebounding from their low of 6.5% in the second and third quarters of last year, earnings expectations fell sharply from 8.3% last quarter to just 6.0% this quarter—a new survey low. The median dropped to just 5.0%, down from 7.0% last quarter. The percentage of CFOs expecting year-over-year gains fell from 82% last quarter to 79% this quarter, and the distribution2 of responses was about average.
  • Country-specific expectations are 6.4% for the US (down from 9.2% last quarter), 4.2% for Canada (up from 3.3%), and 3.1% for Mexico (down from 6.5%).
  • All industries expect positive growth, with Retail/Wholesale at 8.7% and both Healthcare/Pharma and T/M/E above 10%. Manufacturing is low at 5.2%, with Technology, Financial Services, and Services even lower at below 4%.

[1] All averages have been adjusted to eliminate the effects of stark outliers.

[2] “Distribution” refers to the spread of the middle 90% of responses.

from page 13:

Employment

What are CFOs’ expectations for their companies’ year-over-year hiring?

Domestic hiring[1]

Expectations fell sharply to match their 3Q12 survey low:

  • Domestic hiring expectations fell to 0.6%, down substantially from last quarter’s 1.2% and matching the lowest level in this survey’s history. The median declined to 0.0%, well below the survey average of 0.7%. The proportion of CFOs expecting gains fell to 47%, also well below the average of 52%. The distribution[2] of responses is below average compared to recent quarters.
  • Country-specific expectations are 0.7% for the US (down from last quarter’s 1.3%, and now at the lowest level in three years), -0.9% for Canada (down from 0.6% last quarter), and 2.7% for Mexico (up from 0.5% last quarter).
  • Technology and Financial Services are highest at 1.6% and 1.4%, respectively (but still low by historical standards). Energy/Resources again indicated contraction at -0.3% (but that is up from -1.2% last quarter), with T/M/E lowest at -1.3%.
Offshore hiring1

Expectations declined sharply and are again well below their long-term survey average:

  • Offshore hiring growth fell to 1.9%, down from last quarter’s 2.8% and now at the lowest level since 2Q14. The median remains at 0.0%, and 45% of CFOs expect year-over-year gains (down from last quarter’s 49%).
  • Country-specific expectations are 1.8% for the US (down from 3.0%), 2.8% for Canada (up from 2.4%), and 0.4% for Mexico (down from 0.8%).
  • Technology indicates the highest expectation at 3.4%, with Energy/Resources and Manufacturing both the lowest at about 1.0%.
Domestic wage growth1

Expectations down slightly, but still indicative of substantial upward wage pressures: •             Domestic wage growth declined to 2.5%, down slightly from last quarter’s 2.7%. The median held at 3.0%, and 90% of CFOs expect year-over-year gains.

  • Country-specific expectations are 2.5% for the US, 2.1% for Canada, and 4.1% for Mexico.
  • All industry-specific expectations are between 2.2% and 3.1%, with Energy/Resources and Healthcare/Pharma on the low end and Services highest.

[1] All averages have been adjusted to eliminate the effects of stark outliers.

[2] “Distribution” refers to the spread of the middle 90% of responses.

Please see full report for industry-specific findings.

from page 15:

Most worrisome risks

Which external and internal risks do CFOs regard as most worrisome?

External concerns: Very strong concerns about the interplay of economic volatility, financial markets, and consumer confidence:

  • Rapidly escalating concerns about global economic volatility: Last quarter, CFOs’ concerns appeared to shift from a specific focus on Europe and China to a more generalized focus on global economic stagnation and volatility. This quarter’s findings show a strong acceleration of that trend.
  • Rising concerns about US economy and consumer spending: Worries rose about a US pullback, with sharply rising concerns about the toll economic and equity market volatility might take on consumers’ willingness to spend.
  • Drastically rising concerns about financial markets: With equity markets falling sharply between surveys, concerns about financial markets skyrocketed this quarter. Many CFOs voiced concerns that rising perceptions of global economic instability might affect the sentiment of financial institutions and investors, which might in turn depress equity valuations and, ultimately, reduce liquidity and consumer spending. FX concerns continued.
  • Rising commodity price worries: Worries about oil and other commodity prices continued to rise this quarter.
  • Continuing policy and regulation concerns: Regulatory concerns are again strong and industry dependent. The 2016 US presidential election emerged as a significant concern last quarter and continues to be a factor this quarter.
  • Declining concerns about competition: Concerns about industry dynamics and competitive behavior continued, but appeared to take a back seat to economic and financial markets concerns.

Internal concerns: Rising focus on adapting to tough conditions

  • Escalating execution concerns: CFOs voiced growing concerns about executing and adapting their operations and initiatives as business conditions shift.
  • Pricing and margin concerns: Concerns about managing prices and cost structures rose markedly this quarter.
  • Key talent retention challenges: Concerns around retention and leadership turnover rose this quarter.

Among the various charts and graphics in the report are graphics depicting trends in “Own Company Optimism” and “Economic Optimism” found on page 6.

_____

RevSD, LLC offers the above commentary for informational purposes only, and does not necessarily agree with the views expressed by these outside parties.

—–

RevSD, LLC (revsd.com) is a management consulting firm and strategic advisory that focuses on the analysis of current and future weak(ening) economic conditions, and offers businesses and other entities advice, strategies, and actionable methods on how to optimally adapt to such challenging, complex conditions.

“CFO Signals” Report – Excerpts

Recently Deloitte released their “CFO Signals” “High-Level Summary” report for the 4th Quarter of 2015.

As seen in page 2 of the report, “One hundred twelve CFOs responded during the two-week period ending November 20. Seventy-six percent of respondents are from public companies, and 82% are from companies with more than $1B in annual revenue. For more information, please see the “About the survey” section of this report.”

Here are some of the excerpts that I found notable:

from page 3:

How do you regard the current and future status of the North American, Chinese, and European economies? Fifty-five percent of CFOs describe North American conditions as good (59% last quarter), and 47% expect better conditions in a year (55% last quarter). Fourteen percent regard China’s economy as good (up from 4% last quarter), and 16% expect improvement (up from 10%). Eight percent describe Europe as good (up from 5%), but only 15% see it improving in a year (down from 30%). Page 8.

What is your perception of the capital markets? Fifty-six percent of CFOs say US markets are overvalued (down from 60% last quarter). Eighty percent again say debt is currently an attractive financing option, and 26% of public company CFOs view equity financing favorably (down from 36% last quarter). Page 9.

Compared to the past 12 months, how do you expect your key operating metrics to change over the next 12 months?* Revenue growth expectations rose from 4.4% to 5.9%, well above their 2Q15 lows and about even with a year ago. Earnings growth expectations rebounded from last quarter’s survey-low 6.5%* to 8.3%*—back near the two-year average. Capital spending expectations rebounded from last quarter’s 4.3%* to 4.9%*. Domestic hiring growth expectations are again sluggish, falling slightly to 1.2% from last quarter’s 1.4%. Pages 11-13.

What are your expectations for the 2016 macroeconomic environment? For each individual economy, the proportion of CFOs expecting 2016 to be better than 2015 was matched by the proportion who did not (US CFOs were more pessimistic about their own economy). About half of US CFOs say the presidential election will impact performance. *Averages are means that have been adjusted to eliminate the effects of stark outliers. Only 27% of surveyed CFOs said improvement in North America’s economy is dependent on improvement in China’s. More than 90% say the federal funds rate will rise, but 60% expect rates below 2% through 2017. About 60% expect the US dollar to rise against the renminbi and the euro. Page 16.

What will you do in 2016 to improve your company’s profitability? The most common tactic combinations include the execution of productivity improvement efforts— paired with a focus on higher-margin businesses or paired with efforts to reduce labor and/or non-labor input costs. One quarter expect to raise prices. Page 22.

*Averages are means that have been adjusted to eliminate the effects of stark outliers

from page 11:

Revenue and earnings

What are CFOs’ expectations for their companies’ year-over-year revenue and earnings?

Revenue¹

Expectations continuing to rebound from 2Q15’s record lows, driven by improvement across countries and in most industries (Services is the exception):

• Revenue growth expectations rose to 5.9%, significantly up from last quarter’s 4.4% and a continuation of a recovery from 2Q15’s survey low of 3.1%. The median returned to a survey-normal 5.0%, up from 4.5% last quarter. Some 82% of CFOs expect year-over-year gains, up from last quarter’s 79%. The distribution² of responses is very broad (the broadest in more than four years), and this phenomenon has sometimes been followed by a significant shift the following quarter.

• Country-specific expectations are 6.3% for the US (up from 5.1% last quarter), 2.8% for Canada (up from -0.7%), and 7.4% for Mexico (up from 6.1%).

• Industry expectations vary considerably, with Retail/Wholesale, Financial Services, and T/M/E strongest (all above 8.5%). Energy/Resources rebounded from last quarter’s -3.5%, but is still comparatively low at 2.8%. Services is lowest at just 0.7%.

Earnings¹

Expectations still below the two-year average, but improvement seen across countries and in most industries (Services is again the exception):

• Earnings expectations rose sharply to 8.3%, well above the 6.5% levels from the past two quarters, but still below the levels from a year ago. The median dropped to 7.0% from last quarter’s 8.0%. The percentage of CFOs expecting year-over-year gains rose to 82% from last quarter’s 79% and is now at the highest level since 4Q14. The distribution² of responses this quarter is about average compared to recent quarters.

• Country-specific expectations are 9.2% for the US (up from 7.6% last quarter), 3.3% for Canada (up from -2.7%), and 6.5% for Mexico (down from 7.9%).

• All industries expect positive growth, with Retail/Wholesale and T/M/E the highest at 13.4% and 13.0%, respectively. Energy/Resources improved from -8.9% last quarter to 3.2%, but is still comparatively low. Services is lowest at 0.0%.

[1] All averages have been adjusted to eliminate the effects of stark outliers.

from page 13:

Employment

What are CFOs’ expectations for their companies’ year-over-year hiring?

Domestic hiring¹

Expectations muted and well below those from a year ago:

• Domestic hiring expectations fell to 1.2%, down slightly from last quarter’s 1.4% and again one of the lowest levels in the last two years. The median declined to 0.0%, which is again below the survey average of 0.7%. The distribution2 of responses this quarter is below-average compared to recent quarters.

• Country-specific expectations are 1.3% for the US (above last quarter’s 1.2%, but still among the lowest levels in the past two years), 0.6% for Canada (up from -0.9% last quarter), and 0.5% for Mexico (down from 5.0% last quarter).

• Technology, Healthcare/Pharma, and Financial Services are the highest at 2.4%. Energy/Resources again indicated the lowest average expectation at -1.2% (up from last quarter’s -2.1%), with Manufacturing also low at 0.2% (up slightly from last quarter’s 0.0%).

Offshore hiring¹

Expectations flat and about equal to their long-term survey average:

• Offshore hiring growth rose to 2.8%, up slightly from last quarter’s 2.7%. The median remains at 0.0%, and 49% of CFOs expect year-over-year gains (up from last quarter’s 46%).

• Country-specific expectations are 3.0% for the US (down slightly from last quarter’s 3.1%), 2.4% for Canada (up from 2.0%), and 0.8% for Mexico (down from 1.7%).

• Technology indicates the highest expectations at 5.6%, with Energy/Resources again the lowest at 0.0%.

Domestic wage growth¹

Expectations up slightly, but indicative of strong wage pressures:

• Domestic wage growth rose to 2.7% from last quarter’s 2.5%. The median held at 3.0%, and 91% of CFOs expect year-over-year gains.

• Country-specific expectations are 2.7% for the US, 2.0% for Canada, and 3.4% for Mexico.

• All industry-specific expectations range between 1.9% and 3.2%, with Energy/Resources lowest and Services highest.

[1] All averages have been adjusted to eliminate the effects of stark outliers.

Please see full report for industry-specific findings.

Among the various charts and graphics in the report are graphics depicting trends in “Own Company Optimism” and “Economic Optimism” found on page 6.

_____

StratX, LLC offers the above commentary for informational purposes only, and does not necessarily agree with the views expressed by these outside parties.

—–

StratX, LLC (stratxllc.com) is a management consulting firm and strategic advisory that focuses on the analysis of current and future weak(ening) economic conditions, and offers businesses and other entities advice, strategies, and actionable methods on how to optimally adapt to such challenging, complex conditions.

“CFO Signals” Report – Excerpts

Recently Deloitte released their “CFO Signals” “High-Level Summary” report for the 3rd Quarter of 2015.

As seen in page 2 of the report, “One hundred fourteen CFOs responded during the two-week period ending August 21. Seventy-one percent of respondents are from public companies, and 84% are from companies with more than $1B in annual revenue. For more information, please see the “About the survey” section of this report.”

Here are some of the excerpts that I found notable:

from page 3:

How do you regard the current and future status of the North American, Chinese, and European economies? Fifty-nine percent of surveyed CFOs describe North American conditions as good (even with last quarter), and 55% expect better conditions in a year (about even with last quarter). Just 4% percent regard China’s economy as good (down sharply from 23% last quarter), and only 10% expect improvement (down from 16%). Five percent describe Europe as good, and 30% see it improving in a year (both are about even with last quarter). Page 8.

What is your perception of the capital markets? Sixty percent of CFOs say US markets are overvalued (down from 65% last quarter). Eighty percent say debt is currently an attractive financing option, and 36% of public company CFOs view equity financing favorably (up slightly from 34% last quarter). Page 9.

Compared to the past 12 months, how do you expect your key operating metrics to change over the next 12 months?* Revenue growth expectations rose to 4.4% from last quarter’s survey-low 3.1%, but are still among the lowest in the five-year history of this survey. Earnings growth expectations held at last quarter’s survey-low 6.5%. Capital spending expectations fell from last quarter’s 5.4% to just 4.3%—only slightly above the survey low of 4.2% from 4Q12. Domestic hiring growth expectations are again sluggish, rising only slightly to 1.4% from last quarter’s 1.2%. Pages 11-13.

Overall, what external and internal risks worry you the most? Economic worries escalated again, with rapidly growing concerns about the impact of Europe and China on North American growth. Concerns about unemployment, housing, and wages declined somewhat, but concerns about oil prices, interest rates, and exchange rates rose. Internal concerns around acquiring and keeping key talent reached the highest level in the history of this survey. Cyber security concerns rose markedly. Page 15.

*Averages are means that have been adjusted to eliminate the effects of stark outliers

from page 11:

Revenue and earnings

What are CFOs’ expectations for their companies’ year-over-year revenue and earnings?

Revenue[1]

Expectations rebounded from last quarter’s record low, but reveal significant weakness in Energy/Resources and Manufacturing:

  • Revenue growth expectations rose to 4.4%, recovering somewhat from last quarter’s survey low of 3.05%. The median fell to 4.5% from 5.0% last quarter, and 79% of CFOs expect year-over-year gains (about even with last quarter’s record low). Variability of responses is lower than last quarter, but still high relative to the survey average.
  • Country-specific expectations are 5.1% for the US (up from 3.0% last quarter), -0.7% for Canada (up from -2.1%), and 6.1% for Mexico (down from 7.9%).
  • Industry expectations vary considerably, with Retail/Wholesale, Financial Services, Healthcare/Pharma, and T/M/E strongest (all at or above 6.8%). Manufacturing expects just 2.5% growth, and Energy/Resources trails the pack at just -3.5%, down from last quarter’s -2.5%.
Earnings1

Expectations holding at last quarter’s record low, but possible signs of future improvement: • Earnings expectations held at 6.5%, matching last quarter’s survey low. There are possible signs of improvement, however, with the median rebounding from last quarter’s survey-low 5.0% to 8.0% this quarter, and 79% of CFOs still expecting year-over-year gains. Variability of responses is about the same as last quarter, and it is still among the highest levels in the last three years.

  • Country-specific expectations are 7.6% for the US (up from 6.9% last quarter), -2.7% for Canada (up from -3.6%), and 7.9% for Mexico (down from 13.2%).
  • Retail/Wholesale and Technology improved to 11.6% and 11.0%, respectively (up from 7.3% and 8.8% last quarter, respectively). Energy/Resources continued to pull down the average, falling to -8.9% from -5.8%.

[1] All averages have been adjusted to eliminate the effects of stark outliers.

from page 13:

Employment

What are CFOs’ expectations for their companies’ year-over-year hiring?

Domestic hiring[1]

Expectations better, but not indicative of large-scale job creation:

  • Domestic hiring expectations rose to 1.4%, up slightly from last quarter’s 1.2%. The median rose from 0.0% to 1.5%, and 57% of CFOs expect year-over-year gains (up from last quarter’s 49%). Variability of responses rose again this quarter and is now above the five-year survey average.
  • Country-specific expectations are 1.2% for the US (up from last quarter’s 1.0%, but still among the lowest levels in the past two years), -0.9% for Canada (up from -1.0% last quarter), and 5.0% for Mexico (up from 4.2% last quarter).
  • Energy/Resources indicates the lowest average expectation at -2.1%, with Manufacturing and Healthcare/Pharma also low at 0.0%. Services and Financial Services are the highest at 3.9% and 3.6%, respectively.
Offshore hiring1

Expectations rose, but are still in line with recent ranges: •  Offshore hiring growth rose to 2.7%, up from last quarter’s 2.0%. The median remains 0.0%, and 46% of CFOs expect year-over-year gains (up from last quarter’s 39%).

  • Country-specific expectations are 3.1% for the US (up from 2.2% last quarter), 2.0% for Canada (up from 1.8%), and 1.7% for Mexico (up from 1.1%).
  • T/M/E indicates the highest expectations at 10.7%, with Energy/Resources the lowest at -0.1%.

[1] All averages have been adjusted to eliminate the effects of stark outliers.

Please see full report for industry-specific findings.

Among the various charts and graphics in the report are graphics depicting trends in “Own Company Optimism” and “Economic Optimism” found on page 6.

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StratX, LLC offers the above commentary for informational purposes only, and does not necessarily agree with the views expressed by these outside parties.

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StratX, LLC (stratxllc.com) is a management consulting firm and strategic advisory that focuses on the analysis of current and future weak(ening) economic conditions, and offers businesses and other entities advice, strategies, and actionable methods on how to optimally adapt to such challenging, complex conditions.

“CFO Signals” Report – Excerpts

Recently Deloitte released their “CFO Signals” “High-Level Summary” report for the 2nd Quarter of 2015.

As seen in page 2 of the report, “One hundred one CFOs responded during the two-week period ending May 22. Seventy-one percent of respondents are from public companies, and 84% are from companies with more than $1B in annual revenue. For more information, please see the “About the survey” section of this report.”

Here are some of the excerpts that I found notable:

from page 3:

How do you regard the current and future status of the North American, Chinese, and European economies? Fifty-nine percent of CFOs describe North American conditions as good (even with last quarter), and 54% expect better conditions in a year (64% last quarter). Twenty-three percent regard China’s economy as good (up from 18% last quarter), and 16% expect improvement (up from 13%). Five percent describe Europe as good, and 30% see it improving in a year (up from 10%). Page 8.

What is your perception of the capital markets? Sixty-five percent of CFOs say US markets are overvalued (up from 46% last quarter and a new survey high). Ninety-one percent say debt is currently an attractive financing option, and 42% of public company CFOs view equity financing favorably (up markedly from 33% last quarter). Page 9.

Compared to the past 12 months, how do you expect your key operating metrics to change over the next 12 months?* Revenue growth expectations fell to 3.1% from 5.4% last quarter and now sit at the lowest level in the five-year history of this survey. Earnings expectations fell sharply to 6.5% from 10.6% last quarter and also reached their survey low. Capital spending expectations rose slightly to 5.4% from last quarter’s 5.2%. Domestic hiring expectations fell to 1.2% (down from last quarter’s 2.4%) and are now at their lowest level since 1Q14. Pages 11-13.

Overall, what external and internal risks worry you the most? Economic worries escalated, with growing concerns around the possibility of a pullback in the US. Concerns about the strength of the US dollar receded, but concerns about oil prices, interest rates, and equity market corrections rose. Internal concerns about execution and availability of talent are again substantial. Page 15.

*Averages are means that have been adjusted to eliminate the effects of stark outliers

from page 11:

Revenue and earnings

What are CFOs’ expectations for their companies’ year-over-year revenue and earnings?

Revenue1

Expectations declined sharply—due to lower expectations across all industries and particular weakness in Energy/Resources:

  • Revenue growth expectations fell to 3.1% from 5.4% last quarter and now sit at the lowest level in the five-year history of the survey. The median remains at 5.0%, but just 78% of CFOs expect year-over-year gains (also a survey low). Variability of responses is lower than last quarter, but still high relative to the survey average.
  • Country-specific expectations are 3.0% for the US (down from 6.1%), -2.1% for Canada (down from +2.1%), and 7.9% for Mexico (up from 3.1%). Canada’s decline is mostly the result of lower expectations from Energy/Resources (especially oil and gas companies).
  • Expectations for all industries declined this quarter. Financial Services and Healthcare/Pharma* CFOs have the highest expectations at 6.4% and 7.6%, respectively. Energy/Resources is the driver of lower aggregate expectations, falling sharply to -2.5% this quarter from -0.2% last quarter.

Earnings1

Expectations declined sharply—with declines in all industries except Financial Services and another large decrease in Energy/Resources:

  • Earnings expectations fell sharply to 6.5% from 10.6% last quarter and reached their survey low. The median fell sharply to 5% (another survey low), and 79% of CFOs expect year-over-year gains (matching the lowest level in two years). Variability of responses is not as high as it was last quarter, but it is still among the highest levels in the last three years.
  • Country-specific expectations are 6.9% for the US (down from 12.3% last quarter), -3.6% for Canada (down from 3.1% last quarter), and 13.2% for Mexico (up from 2.8% last quarter).
  • All industries are down this quarter except for Financial Services. All are above the 6.5% cross-industry average except for Energy/Resources, which comes in at -5.8% (down from -1.1% last quarter). Healthcare/Pharma* and T/M/E* are the highest at about 12.5%.

* Asterisks indicate industries with sample sizes of less than five for this quarter.

from page 13:

Employment

What are CFOs’ expectations for their companies’ year-over-year hiring?

Domestic hiring1

Hiring expectations fell sharply from recent highs:

  • Domestic hiring expectations fell to 1.2% (down from last quarter’s 2.4%) and are now at their lowest level since 1Q14. The median fell to 0.0%, and 49% of CFOs expect year-over-year gains, well under last quarter’s 58% and the lowest level since 1Q14. Variability of responses rose significantly this quarter, but is about same as the long-term survey average.
  • Country-specific expectations are 1.0% for the US (down from 2.3% last quarter), -1.0% for Canada (down from 1.4 % last quarter), and 4.2% for Mexico (down from 4.7% last quarter).
  • Energy/Resources and T/M/E* have the lowest average expectations at 0.9% and -1.3%, respectively, while Financial Services and Technology* have the highest at 3.9% and 2.5%, respectively.

Offshore hiring1

Offshore hiring expectations declined:

  • Offshore hiring declined to 2.0%, below last quarter’s 3.1% but still in line with levels over the past few years. The median remained at 0.0%, and just 39% of CFOs expect year-over-year gains—the lowest level since 1Q14.
  • Country-specific expectations are 2.2% for the US (down from 3.2% last quarter), 1.8% for Canada (down from 2.5% last quarter), and 1.1% for Mexico (down from 3.0% last quarter).
  • Technology* and T/M/E* have the highest expectations at 4.5% and 8.1%, respectively. Manufacturing and Energy/Resources have the lowest expectations, with both below 1.0%.

* Asterisks indicate industries with sample sizes of less than five for this quarter.

¹All averages have been adjusted to eliminate the effects of stark outliers.

Among the various charts and graphics in the report are graphics depicting trends in “Own Company Optimism” and “Economic Optimism” found on page 7.

_____

StratX, LLC offers the above commentary for informational purposes only, and does not necessarily agree with the views expressed by these outside parties.

—–

StratX, LLC (stratxllc.com) is a management consulting firm and strategic advisory that focuses on the analysis of current and future weak(ening) economic conditions, and offers businesses and other entities advice, strategies, and actionable methods on how to optimally adapt to such challenging, complex conditions.