Economic Optimism Increases Among U.S. and Europe CFOs

Chief Financial Officers still see a tough road ahead, but are demonstrating a strong outlook, according to the most recent survey of CFOs conducted by Financial Executives International (FEI) and Baruch College’s Zicklin School of Business.

CFOs in Europe and the United States have increased optimism in the global economy and their businesses, with fewer concerns over inflation, oil and hiring than last quarter.  U.S. CFOs are showing a brighter outlook in particular and despite little approval for President Obama and Congress’ handling of the economy, half now believe that the country is in the midst of a recovery.

Respondents to the quarterly “CFO Outlook Survey,” which polls CFOs of public and private businesses in the U.S., Mexico and Europe (Italy and France) on their economic and business confidence, expressed a higher level of optimism compared with the previous quarter. European CFOs’ optimism in the global economy increased over two points (from 51.80 to 54.00), but it still remains below the survey high one year ago (58.9).  Their level of confidence in their own companies also increased slightly to 58.30 (from 57.60 in Q4), although it remains below where it stood a year ago (66.1). U.S. CFOs’ confidence also experienced increases this quarter.

Their optimism in the global economy increased more than five points to 51.9 (from 46.10 in Q4), and their optimism in their own companies saw a three point increase to 70.60 (from 67.60 in Q4).   The CFO Optimism Index for the U.S. economy had a similar increase to 60.60 (from 57.10 in Q4).  This quarter, net earnings, capital spending, revenue and technology spending remained the top areas where CFOs across the board are expecting positive increases over the next 12 months.  U.S. CFOs are expecting a 20 percent increase in their net earnings, compared with 13 percent last quarter.

Despite their climbing optimism, CFOs on average continue to believe that that the unemployment rates will remain at high levels for the next six to 12 months. Although the U.S. CFOs believe the rate will slightly decline from 8.3 to 8.1 percent, European CFOs think their countries’ unemployment rates will climb from 8.6 to 9 percent.  While 59 percent of U.S. CFOs have seen wage levels rise, the majority of those responding in Europe (63%) report that they have stayed the same. Still, the majority of U.S. CFOs (62%) plan to hire additional employees at their companies in the next six months, compared with only a third of European CFOs (35%).  Of those who are hiring, CFOs are most commonly seeking mid-career professionals to fill their staff (70% of U.S. and 42% of European CFOs), followed by experienced and skilled technical workers (49% of U.S. and 40% of European CFOs).  CFOs are also seeking entry-level college graduates, which was the third highest choice among relevant respondents (45% of U.S. and 38% of European CFOs).

“Over the last several quarters, confidence among U.S. and European CFOs had fluctuated, but CFOs are kicking off 2012 with a relatively encouraging outlook,” said John Elliott, Dean of the Zicklin School of Business at Baruch College. “U.S. CFOs remain particularly optimistic in their companies’ expectations, reflecting projections in net earnings, optimism in the U.S. economy and small dips in unemployment rate.  CFO sentiment this quarter demonstrates good signs for U.S. job seekers in the year ahead, and while Europe is improving, it has not yet moved the needle to positive job growth.”

CFOs believe that crude oil prices, which were $105.66 when the survey was taken, will not change substantially in the next six months. Forty-two percent of U.S. CFOs and forty-eight percent of EU CFOs believe it will average $110, while another third of those in the U.S. (32%) and a quarter of Europe (26%) think prices will fall to $100.  Most CFOs stated that their company is not actively engaged in changing behavior to accommodate rising oil prices (66% in the EU; 63% in the U.S.).

CFOs forecast the inflation rate in the U.S. to be at 2.5 percent six months from now, rising to three percent a year from now, and European CFOs forecast  their inflation rates to come in at 2.8 percent six months from now, rising to 3.1 percent a year from now.  On average, CFOs have a moderate to low concern about inflation, and when asked to rank their concern on a scale of one to five, 39 percent of EU CFOs and 36 percent of U.S. CFOs expressed a “three,” with a near even split on either side.  CFOs across the board also generally believe commodity prices will be higher six months from now (63% of U.S. CFOs and 51% of EU CFOs). Of those that believe prices will be higher, the overwhelming majority of European CFOs do not feel they will be able to pass added costs on to the price of their products and services, due to competition (57%) or other reasons (31%). In the U.S., nearly a third (31%) do believe that the costs can be passed on to products and services.

U.S. CFOs: Stronger Outlook on Economic Recovery; Failing Grades For President, Congress

Half (50%) of U.S. CFOs this quarter believe the U.S. is already in the midst of a recovery, while another quarter of respondents believe a recovery will take place in 2013, and 18 percent believe it will not happen until 2014 or beyond. While U.S. CFOs may appear to be split in their view of the recovery, they are unified in their grades of both President Obama and Congress in their handling of key issues. More than half of U.S. CFOs stated that they would give the President a D or F grade for his Administration’s performance in healthcare (66%), employment (59%) and the economy (60%). In general, similar grades were given to the Senate and the House of Representatives regarding the same issues. CFOs view their work on national security, environmentalism and education slightly more positive.

With regard to their views on current legislation, the majority U.S. CFOs revealed that a possible repeal of the Patient Protection and Affordable Care Act and the health care-related text of the Health Care and Education Reconciliation Act of 2010 would have a positive impact on their business (59%). Another third (32%) of respondents felt a repeal would have no impact.  U.S. CFOs are also supporting the adoption of an all encompassing energy policy, with the areas of greatest importance including the opening of more federal lands for oil and gas drilling (66%),  focus on energy infrastructure investment (60%), focus on energy independence (58%) and tax incentives for developing renewable energy sources (50%).

“CFOs in the U.S. this quarter continue to express widespread dissatisfaction with the performance of the current administration over key areas that are critical to the pulse of their business – the economy, employment and healthcare — which will likely continue as we move closer to election decisions,” said Marie Hollein, President and CEO of Financial Executives International.   “The findings show that CFOs also hold Congress responsible. U.S. CFOs expect an eight percent increase in health care costs over the next year compared with a mere 1.3 percent increase expected by their European counterparts. Given these expectations, it’s not surprising that CFOs are concerned about the fate of the healthcare bill.”

The CFO Outlook Survey also found a number of differences in CFOs’ sentiments on social media practices and respect for global leaders by region:

  • Global Leadership: When all CFOs were asked about the global leaders they respected most from an economic policy perspective, President Obama was ranked as the top choice, but not in the U.S.  Among CFOs in the United States, Obama was second to Chancellor of Germany Angela Merkel; rounding out U.S. CFOs’ top three leaders was Prime Minister of Canada Stephen Harper.  Among European CFOs, Merkel and Prime Minister of the Italian Republic Mario Monti were ranked two and three respectively behind Obama.
  • Social Media: Both U.S. and European CFOs were again asked about their use of social media and various requirements to monitor use among employees. More than half (54%) of U.S. CFOs said that their company monitors social media for opinions about their firm, compared with 49 percent of European CFOs — this is a change from six months ago, when the majority of CFOs (52% in the U.S. and 65% in the EU) stated that their company didn’t monitor social media for opinions.  Overall, they expressed a moderate to low concern over how opinions expressed on social media platforms about their firm will impact business: 48 percent of U.S. CFOs and 41 percent of EU CFOs were “somewhat concerned,” while a similar amount (44% in the U.S.; 41 in the EU) were “not concerned.” CFO also generally have a satisfactory understanding of their country’s social media requirements and regulations — 56 percent of both U.S. CFOs and EU CFOs feel that they have a good grasp on standards. The majority of U.S. CFOs (56%) have internal (employee) policies in place to protect their company and employees from the risks of social media use, compared with 37 percent of CFOs in Europe.

CFOs are also recognizing the influence and risk of social media, and allocating budget toward education and other developments in this area over the next year. Forty-two percent of U.S. CFOs and 26 percent of EU CFOs are allocating funds toward educating employees on appropriate social media use, while 30 percent of U.S. CFOs and 29 percent of EU CFOs are buying advertising space on various social media platforms to promote their businesses.

Additional results from the survey include CFOs’ expectations on the strength of the U.S. Dollar as compared to the Renminbi, Peso, Pound, Euro and Yen. For the first time, results are also available from a sample (40) of CFOs from Mexico. Full survey results and historical data comparisons are available at or from Nicole Madison at The study is also available online at the Financial Executives Research Foundation bookstore and on the Baruch College home page at

Overview of the Survey:

This quarter, the CFO Outlook Survey, conducted by Financial Executives International and Baruch College’s Zicklin School of Business, interviewed 219 corporate CFOs from the United States, 104 corporate CFOs from Italy and 26 corporate CFOs from France electronically from April 9 – 24. CFOs from both public and private companies and from a broad range of industries, revenues and geographic areas, including some off-shore companies, are represented. The U.S. survey respondents are members of Financial Executives International; France survey respondents are members of Association Nationale Des Directeurs Financiers Et Du Controle De Gestion (DFCG) and Italy survey respondents are members of Associazione Nazionale Direttori Amministrativi E Finanziari (ANDAF). Financial Executives International has been conducting surveys gauging the country’s economic outlook from the perspective of CFOs for more than 11 years.

Leave a Reply