“CFO Signals” Report – Excerpts

Recently Deloitte released their “CFO Signals” “High-Level Summary” report for the 4th Quarter of 2018.

As seen in page 2 of the report, there were 147 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:


How do you regard the status of the North American, European, and Chinese economies? Perceptions of North America declined, with 88% of CFOs rating current conditions as good (down from 89% last quarter), and 28% expecting better conditions in a year (down from 45%, and a five-year low). Perceptions of Europe declined markedly to 23% and 7% (from 32% and 23%), and China also declined sharply to 24% and 12% (from 37% and 27%). Page 6.

What is your perception of the capital markets? A four-year-low 62% of CFOs say debt financing is attractive (73% last quarter). Attractiveness of equity financing fell for public company CFOs (from 42% to 35%) and also for private company CFOs (53% to 37%). Sixty-five percent of CFOs now say US equities are overvalued—down from last quarter’s 71%. Page 7.


Overall, what risks worry you the most? Following the US midterm elections, external risks have become an even stronger focus. CFOs express concerns about trade policy and political turmoil, and rising worries about economic growth. Talent is again the top internal concern. Page 8.

Compared to three months ago, how do you feel about the financial prospects for your company? The net optimism index fell drastically from last quarter’s +36 to just +3 this quarter—the lowest reading in nearly three years. Just 26% of CFOs express rising optimism (48% last quarter), and 23% express declining optimism (12% last quarter). Page 9.


What is your company’s business focus for the next year? CFOs indicate a smaller bias toward growth over cost reduction (50% vs. 21%) and a lower bias toward investing cash over returning it (48% vs. 18%). The bias toward current offerings over new ones shifted toward new (43% vs. 40%), and the bias toward current geographies over new ones decreased (60% vs. 17%). 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 declined from 6.1% to 5.5%, and earnings growth declined from 8.1% to 7.3% (their lowest levels in one and two years, respectively). Capital investment slid from 9.4% to just 5.0% (the lowest level in two years). Domestic hiring rose from 2.7% to 3.2% (matching its survey high). Dividend growth fell from last quarter’s very high 7.4% back to 4.5% (the two-year average). Page 11.

Special topic: Economic, capital markets, and company expectations

What are your expectations for the macroeconomy in 2019? The vast majority of CFOs do not expect the US, Canadian, or Mexican economies to improve, and 55% expect a US recession by 2020. Expectations for business spending declined sharply, and those for labor costs rose. Page 12.

from page 9:


Optimism regarding own-companies’ prospects

Optimism plummeted to its lowest level in nearly three years, with all countries registering some of their lowest-ever readings. CFOs citing declining optimism nearly matched the proportion citing rising optimism.

Net optimism declined very sharply, from last quarter’s +36 to just +3—the lowest reading since 1Q16, and the third straight decline. Just 26% of CFOs expressed rising optimism (down from 48%), and 23% cited declining optimism (up from 12%).

Net optimism for the US reached its lowest point since 1Q16 at +9. Canada fell to a new survey low at -36, and Mexico fell to its lowest point since 1Q17 at -43. 

Sentiment declined for nearly all industries. The strongest gains were in Technology, which rose from +17 to +25 following last quarter’s sharp decline. Sentiment fell most sharply in Manufacturing (to a 7-year low), Healthcare/Pharma, and Services.

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

from page 11:


Growth in key metrics, year-over-year

Expectations for sales, earnings, and capital spending declined and are at or below their two-year averages. Expectations for hiring and wages rose. Retail/Wholesale and Technology are the relative bright spots.

Revenue growth declined from 6.1% to 5.5%, even with its two-year average. All three countries declined to their lowest levels in a year, with the US and Mexico still above their two-year averages and Canada below. Technology and Energy/Resources lead; Manufacturing and Healthcare/Pharma trail.

Earnings growth declined from 8.1% to 7.3%, its lowest level since 4Q16. The US fell below its two-year average. Canada fell to its lowest level since 3Q15, and Mexico rose slightly. T/M/E and Technology are highest; Financial Services and Healthcare/Pharma are lowest.

Capital spending growth declined sharply from 9.4% to 5.0%, a two-year low. The US and Mexico fell to their lowest levels since 4Q16; Canada declined sharply to its lowest level in a year. Retail/Wholesale and Services are highest; Energy/Resources and Manufacturing are lowest.

Domestic personnel growth rose from 2.7% to 3.2%, again above its two-year average. The US rose to just below its survey high. Canada rose to well above its two-year average; Mexico rose to an eight-year high. Retail/Wholesale and Technology lead; Financial Services and T/M/E trail.

Dividend growth declined sharply from 7.4% to 4.5%, erasing last quarter’s marked uptick.

Please see the full report 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.