Trump's Trade War, Brexit Are Decreasing CFO Confidence in the Economy: Survey

Chief financial officers at major American companies are concerned about the economic impact of President Donald Trump's trade war with China, according to a a third-quarter survey released by Deloitte on Thursday.

Expressing concerns about the potential impact of Brexit and the European economy, CFOs voiced less confidence in North America than in the previous quarter. Regard for the European and Chinese economies was also low.

The proportion of CFOs who rated economic conditions in the U.S. as good dropped to a six-year low of 68 percent. That figure represented a drop of 11 percentage points from the second quarter survey, and the fifth straight quarter in which fewer respondents rated the economy as good.

Eighty-nine percent of CFOs participating in the survey were from U.S. companies, while 6 percent were from Canada and 5 percent were from Mexico. The vast majority are from businesses with over $1 billion in annual revenue.

Although only 15 percent of respondents predicted an extended decline in economic activity, a range of metrics in the survey indicated waning CFO optimism. Expectations for year-over-year capital expenditure growth dropped from 7.7 percent to 3.6 percent, matching a three-year low. Projected year-over-year domestic hiring growth dropped from 1.9 percent to 1.6 percent. Expected year-over-year earnings growth declined to 5.6 percent, the lowest mark in the survey's history. Net optimism also indicated the first negative reading in almost seven years, marking a pointed decrease in how CFOs felt about financial prospects for their companies.

"The biggest movement in the survey is around the net optimism index," Sandy Cockrell, the Deloitte Global CFO Program Leader, told Newsweek.

And CFOs' own regard for their companies fell into the negative for the first time in seven years. At the same time, the financial officers said they felt that national policy developments were constraining their companies.

"We always ask a question about what—from a CFO's perspective—what are your constraints in terms of company performance?" Cockrell told Newsweek. "If you go back a year ago, CFOs were really focused on the internal constraints, which is actually kind of positive, because they feel like they've got a lot more control over their destiny because they can pull levers to manipulate internal constraints...That's now flipped, and it's flipped heavily," he said, noting that external pressure can create pessimism.

The impact of U.S. trade policy on global growth was among the factors cited as an external pressure. Uncertainty remains a troubling factor facing CFOs. Trump's attempt to rework global trade negotiations has created a conundrum for companies, who are left to adjust to constant changes in trade policy.

Difficulties caused by uncertainty would persist as businesses seek to draw up their budgets for the coming year, Cockrell said.

"Most all of these companies are just at the precipice of beginning to build their 2020 budgets and plans. And they'll be taking those to their boards of directors over the next 60 days," he told Newsweek, noting, "It almost is impossible" to forecast input prices because of tariffs.

Even so, the CFOs polled did not indicate that they would focus on revenue growth, investing cash and other offense-oriented measures measures.

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Traders work the floor of the New York Stock Exchange on August 23 in New York. Financial executives are expressing the highest levels of pessimism seen in six years, according to a Deloitte survey published Thursday. DON EMMERT/AFP/Getty Images