Why CFOs have increased confidence in the US economy
- 67% of CFOs say the US economy is improving, down from 82% at the end of 2013.
- About two-thirds of CFOs are either highly concerned or concerned about a cyberattack.
- CFOs rank weakening consumer demand as their largest external risk factor.
- The market for deals is improving: 61% of CFOs say deal activity is in line with historical averages, versus said activity was below average at the end of 2013.
A note from Tom McGrath, EY Americas Senior Vice Chair – Accounts
CFOs continue to be optimistic about the US economy, but less so than at the end of 2013, according to the latest CNBC Global CFO Council poll, which is sponsored exclusively by EY. New data show that 67% of CFOs think the economy is improving, compared to 82% who felt this way at the end of last year.
Why the decline in confidence? The lingering effects of a lackluster holiday season could be partly to blame: CFOs rank weakening consumer demand as their top external risk factor, ahead of US fiscal policy and emerging market economies. Recent regional crises also serve to remind us that geopolitical risks are always a concern for finance executives, who need to expect the unexpected.
However, CFOs appear to be encouraged by two positive developments in Washington: the raising of the debt ceiling and the confirmation of Janet Yellen to lead the Federal Reserve. In fact, CFOs say that monetary policy and the debt ceiling no longer rank among their top 10 external risk factors, a marked change since last quarter.
Savvy CEOs are taking this time to elevate their growth agenda. More of them are now seeking both organic and inorganic growth opportunities, and they are more confident in the market for deals. In the latest poll, 61% of CFOs say M&A activity is in line with historical averages — a significant improvement from December, when 70% reported below-average deal volume. For example, we are seeing many companies, including pharmaceuticals, life sciences and biotechnology, strategically repositioning themselves for growth.
Companies that aren’t looking to acquire can still power transformational change through cost cutting and rationalization. CFOs need to ensure all company divisions are fit for purpose and fit for the future. By doing so, this enables them to invest in growth where it makes most sense — and possibly divest where it doesn’t.
Indeed, this is a demanding time for CFOs, who need to drive efficiency in the present while keeping an eye out for future growth opportunities.
“Savvy CFOs are taking this time to elevate their growth agenda.”