CFO survey: US likely to enter a recession by the end of 2019

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IAFEI, Duke University and Grenoble Ecole de Management regularly survey CFOs across the world. For the fourth quarter 2018, the survey ran from November 23 to December 4.


Nearly half (48.6 percent) of U.S. CFOs believe that the US will be in recession by the end of 2019, and 82 percent believe that a recession will have begun by the end of 2020. The end is near for the near-decade-long burst of global economic growth. The U.S. outlook has declined, and moreover the outlook is even worse in many other parts of the world, which will lead to softer demand for U.S. goods.

CFOs are more pessimistic in most other regions of the world. Ninety-seven percent of African CFOs believe their countries will be in recession no later than year-end 2019, as do many CFOs in Canada (86 percent), Europe (67 percent), Asia (54 percent), and Latin America (42 percent).

Optimism index

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In 2019, CFOs expect sub-3% growth for the U.S. economy, with accompanying capital spending and employment growth of about 3 percent. Their recession projections suggest most of this growth will occur early in the year.

Moreover, their forecasts are skewed to the downside, with a one-in-ten chance that annual real growth will be meager 0.6 percent. In this worst-case scenario, CFOs would expect their capital spending to fall by 1.3 percent and for hiring to remain flat. CFOs are getting ready for a recession in the next 18 months. All of the ingredients are in place: a waning expansion that began in June 2009 – almost a decade ago – heightened market volatility, the impact of growth-reducing protectionism and the ominous flattening of the yield curve which has predicted recessions accurately over the past 50 years.

With recession considered likely, optimism was mostly static or fell across the world this quarter. The Optimism Index for the US economy slipped to 66 this quarter, compared to an all-time high of 71 last quarter, CFO optimism about their own firms’ financial prospects dropped two points to 69 on a 100-point scale. Both indices were at all-time highs earlier this year. Canadian optimism was steady at 58, on a scale of 0 to 100. Optimism in Europe dropped a point to 57, after falling 10 points to 58 last quarter. Optimism is at 59 in the UK, 56 in France and 50 in Italy. Capital spending and employment are both expected to grow about 2 percent over the next year.

Once again, the top concern among European CFOs is attracting and retaining qualified employees, followed by economic uncertainty and government policies. Currency risk and employee productivity were also top five concerns.

GDP weighted average global business outlook

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World Bank GDP constant prices in USD.

Optimism in Asia dropped eight points to 52 this quarter. Economic uncertainty remains the top concern. Other concerns include difficulty attracting qualified employees and currency risk. Capital spending is expected to grow about 10 percent, and employment 2 percent, over the next 12 months.

Overall Latin American optimism is 63 this quarter, on a scale of 0 to 100. The Optimism Index is highest in Brazil, at 69, where a new president seen as pro-business has been elected just as the country is emerging from a historic recession. Optimism is 53 in Mexico, 57 in Chile, 61 in Peru, and just 34 in Ecuador, where the government remains mired in corruption investigations. Economic uncertainty remains the top concern among Latin American CFOs. Other concerns include government policies, weak demand and currency risk. Capital spending is expected to grow 2.2 percent and employment 2 percent over the next year.

Business optimism in Africa rebounded to 51 this quarter. Employment should fall about one percent in Africa over the next 12 months. Median capital spending is flat. African CFOs are most concerned about economic uncertainty, governmental policies and regulatory requirements.

Table 1: During the past quarter, which items have been the most pressing concerns for your company’s top management team?

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Table 2: Relative to the previous 12 months, what will be your company’s percentage change during the next 12 months? (mean by region)

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This is the 91st consecutive quarter the Duke University/CFO Global Business Outlook survey has been conducted. The survey concluded December 7, and generated responses from more than 500 CFOs, including 226 from North America, 48 from Asia, 82 from Europe, 122 from Latin America and 32 from Africa.

This article was originally published in French