Global CFOs brace for turbulent year ahead

CFOs worldwide started the year feeling pessimistic, as they worried about fallout from the continuing sovereign debt troubles in the euro zone, social upheaval in the Middle East and dwindling global demand.

The mood was particularly gloomy among CFOs in Belgium, where almost half the respondents expected a deep recession this year, Deloitte’s “Global CFO Signals” survey of CFOs in 35 countries found. Their colleagues in the Middle East, Switzerland and the UK didn’t feel much better.

A second survey showed that concerns about local economic growth and revenue also dampened the confidence and expectations of CFOs in the US. But the quarterly “CFO Outlook Survey”, conducted by Financial Executives International (FEI) and Baruch College at the City University of New York, found that US CFOs had higher growth expectations for their businesses than their European counterparts did.

“US CFOs now see continuing improvement in unemployment rates, which they expect to drop to 8.1% within a year,” John Elliott, dean of the Zicklin School of Business at Baruch College, said in the FEI report.

A survey released Thursday by the AICPA revealed a more optimistic view about the US economy among CPA decision-makers in the United States. In the “Business and Industry U.S. Economic Outlook Survey”, 43% of CPAs indicated optimism for the US economy, more than doubling the percentage from the fourth quarter of 2011. Optimists outnumbered pessimists by nearly 2 to 1 in the AICPA survey.

The “Robert Half Professional Employment Report” also projected hiring in professional fields to continue rising in the second quarter – but at a slower pace than forecast for the first quarter. The Robert Half Financial Hiring Index showed CFOs expected a drop in hiring of accounting and finance professionals for the second quarter after three straight quarters of improvement.

Greg Dickinson, director of Deloitte’s North America “CFO Signals” survey, echoed those assessments in a webcast. US CFOs are still pessimistic, Dickinson said, but their projections for revenue, earnings, capital investments and employment growth are still positive.

“That might be the silver lining that at least gives us some hope that things will get better reasonably soon,” he said.

CFOs in other parts of the world started the year feeling much glummer.

CFOs on both sides of the Atlantic named domestic economic growth as their top worry and revenue growth as their companies’ top challenge, according to the FEI report. But European CFOs ranked the financial prospects of their companies about 10 percentage points lower than their counterparts in the US did in the fourth quarter.

Other findings of the surveys include:

• Nearly 40% of CFOs in the UK considered it highly probable that one or more member states will leave the euro zone this year and that the EU could break up, according to Deloitte. 

• European CFOs anticipated the unemployment rate in Europe would rise nearly 1 percentage point to 11.7% this year, FEI found. They were also a lot more pessimistic about their companies’ access to credit, with 54% expecting access to become more difficult compared with only 10% of US CFOs feeling that way.

• In the Middle East, CFO optimism reached a two-year low at the end of 2011, Deloitte reported. Sixty-eight percent of CFOs in the Middle East said their businesses are facing an above-average level of financial and economic uncertainty.

• CFOs in Australia also expected a difficult year ahead, according to the Deloitte survey. Forty-five percent expected their operating margins to decrease, and 84% had no plans to expand staffing this year.

• Deloitte found the most upbeat CFOs in Ireland, where 43% reported that their companies had returned to growth by the end of 2011.

—Sabine Vollmer (svollmer@aicpa.org) is a CGMA Magazine senior editor.