According to Deloitte’s quarterly CFO Signals survey, in North America, 59% of CFOs expressed optimism for the current economy in Q1/24, up from the 47% tracked in Q4/23. CFOs also slightly raised their assessment of economic conditions in Europe, with 12% rating the current economy as good or very good compared with 9% in the previous quarter. Additionally, CFOs almost doubled their positive assessment of economic conditions in South America, jumping from 8% in Q4/23 to 14% in this quarter’s report. CFOs’ outlook for economic conditions to improve in China in the year ahead stayed flat at 3%, while CFOs dropped their assessment for conditions in Asia (excluding China) to 27% from 28% in Q4/23.
For the year ahead, 54% of CFOs expect economic conditions in North America to improve, up from 37% the previous quarter. Just under one-quarter (24%) of CFOs expect the European economy to improve in a year, up from 16% in Q4/23. Regarding China’s economy, 17% of CFOs expect conditions to improve in a year, an increase from 12% last quarter. CFOs also expressed optimism that economic conditions in Asia (excluding China) would improve in a year, climbing to 31% from 26% in Q4/23. CFOs’ expectations for improvement in economic conditions only fell in their assessment of South America, where 16% expect conditions to improve, dropping from 18% last quarter.
Own Company Optimism and Risk
The percentage of CFOs expressing optimism for their companies’ financial prospects increased to 42% from 38% in the prior quarter, while those expressing pessimism dropped to 11% from 27%. As a result, CFOs’ net optimism shot up to +31 from +11 in Q4/23. At odds with this rise in optimism, the number of CFOs who believe now is a good time to take greater risks (40%) was outweighed by those who say now is not a good time to take greater risks (60%). This is largely in line with what was found in the previous quarter, signaling that CFOs appear cautious with their risk-taking endeavors despite optimism for economic conditions in the year ahead.
Talent continued to top CFOs’ list of internal concerns, followed by execution and efficiency. A small number of CFOs also noted cyberattacks, cybersecurity and artificial intelligence among their most worrisome internal risks, indicating that such threats are not only an external concern. Externally, concerns over geopolitics and macroeconomics ranked top of mind for CFOs, followed by the political environment.
Growth Expectations for Key Metrics
In Q1/24, CFOs raised their year-over-year growth expectations across the performance metrics tracked by CFO Signals except domestic wages/salaries and capital investment. Compared with Q4/23, CFOs’ expectations for earnings growth increased to 7.3% from 6.8%, growth expectations for revenue rose to 5.4% from 5.1%, growth expectations for dividends rose to 3% from 2.6% and expectations for domestic wages increased to 1.8% from 1.6%. Growth expectations for capital investment fell to 5.8% from 6%, and CFOs dropped their growth expectations for domestic wages/salaries slightly to 3.5% from 3.8%.
Assessment of GenAI
As with the adoption of any new technology, CFOs are looking at how generative artificial intelligence could be deployed across their business. When asked which top five functions their enterprise is exploring for the adoption of GenAI, 64% of CFOs indicated IT, 54% indicated business operations, 50% indicated customer/client services, 49% indicated finance, and 38% indicated sales and marketing. Seventy percent of CFOs expect productivity hikes of between 1% and 10% from GenAI.
Slightly less than half (44%) of respondents said that GenAI has a minimal or moderate impact on their current finance talent models. Moreover, CFOs cited GenAI technical skills (65%), GenAI fluency (53%) and the risk of adoption (30%) as the top three most-cited concerns in enabling finance teams to use the technology. Still, 93% of respondents report that bringing talent with GenAI skills into finance over the next two years is important to varying degrees, with 27% saying it is very important or extremely important, and 33% saying it is moderately important.
When it comes to accessing the skills needed to incorporate GenAI into the broader enterprise, CFOs expect their organizations to develop existing talent (50%) as opposed to hiring external talent (37%), and 37% indicate purchasing vendor solutions or services.
“Talent continues to bubble to the top of these conversations — from both a concern and an opportunity perspective,” Steve Gallucci, national managing partner of the U.S. CFO program at Deloitte, said. This quarter’s report reveals CFOs’ recognition of the importance of digital fluency both in the enterprise and in their own finance organization — although the pace of adoption may vary. Longer term, it appears that digital skills will likely become increasingly integrated into the finance team’s toolkit and into CFOs’ suite of responsibilities.”
“We are seeing GenAI continue to rise on the agenda of CFOs as they explore ways for this innovative technology to augment value for their organization,” Jason Girzadas, US CEO of Deloitte, said. “CFOs are at the forefront to guide strategic investments that will upskill both their finance function and the organization at large and recognize that achieving success in today’s business landscape will require digital fluency across all functions of the organization.”
Assessment Of Capital Markets
Approximately two-thirds of surveyed CFOs (65%) consider U.S. equities overvalued this quarter, a notable increase from 35% in Q4/23. Only 5% of respondents regarded U.S. equities as undervalued, dropping significantly from last quarter’s 23%. Both metrics represent the highest and lowest recordings, respectively, since Q1/22.
CFOs’ enthusiasm for debt and equity financing rose this quarter, perhaps due to the recent rise in stock prices and signals from the Federal Reserve that it may cut interest rates this year. Eighteen percent of CFOs found debt financing attractive, up slightly from last quarter’s 10%, while 37% consider equity financing attractive, an increase from the previous quarter’s 19%.
