Deloitte CFO Signals™ Survey 3Q 2022:

Nearly half of CFOs expect recession in North America by 2023, more are concerned about inflation

Each quarter, CFO Signals™ tracks the thinking and actions of leading CFOs representing North America's largest and most influential companies. Since 2010, the survey has provided key insights into the business environment, company priorities and expectations, finance priorities, and CFOs' personal priorities. Participating CFOs represent diversified, large companies, with 84% of respondents reporting revenue in excess of $1 billion. More than one-quarter are from companies with greater than $10 billion in annual revenue.

Economic outlook
CFOs' sentiment toward current conditions in all five economic regions covered in the CFO Signals survey fell this quarter. For North America, 33% of CFOs rated the current economy as good or very good, a noticeable decline from 52% in 2Q22. However, 29% of CFOs indicated conditions in North America will improve in a year, up from 18% in the prior quarter. 

Own company optimism and risk
The percentage of CFOs expressing more optimism for their companies' financial prospects declined to 19% from 27% in the prior quarter. This figure is the lowest it has been since the 2Q20 survey. That said, there was a slight uptick in the percentage of CFOs saying now is a good time to be taking greater risks, at 38%, compared to 35% in 2Q22. Inflation and geopolitics stood out most prominently among CFOs' long list of external risks.

Key operating metrics
For the second consecutive quarter, CFOs lowered their year-over-year growth expectations for revenue, earnings and capital spending. Revenue growth decreased to 6.2% from 7.8%, earnings growth declined to 6.4% from 8.4%, and capital spending growth expectations fell to 4.3% from 11.2%. CFOs also reduced their growth expectations for both domestic wages/salaries and domestic hiring — the first significant decrease since the 2Q20 CFO Signals survey.

Recession and inflation expectations and planning
Forty-six percent of surveyed CFOs expect the North American economy to be in a recession by the new year. CFOs are taking actions to prepare, including the most-often cited step: reducing or closely managing operating expenses. CFOs are also controlling headcount, limiting hiring, and increasing productivity. Furthermore, several CFOs are evaluating their customers, services and/or products to identify opportunities to help recession-proof their organizations.

Slightly more than one-third of CFOs (39%) noted they expect the North American economy to be in a period of stagflation by 2023. Another 15% expressed a more optimistic outlook, indicating they expect the region's economy to be growing with low-to-moderate inflation by 2023. Of note, CFOs' concerns over persistent inflation outweighed angst over the possibility of a recession nearly 3 to 1.

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