Deloitte “CFO Signals” Report Q1 2014 – Notable Aspects

Recently Deloitte released their “CFO Signals” “High-Level Summary” report for the 1st Quarter of 2014.

As seen in page 2 of the report, "One hundred and nine CFOs responded during the two-week period ending February 21. Sixty-nine percent of the respondents are from public companies, and 81% are from companies with more than $1B in annual revenue. For more information, please see the “About the Survey” section of this report."

Here are some of the excerpts that I found notable:

from page 3:

How do you regard the current and future status of the North American,Chinese, and European economies? Views of North America improved, with 42% describing conditions as good (26% last quarter), and 62% expecting better conditions in a year (55% in 4Q13). Thirty-seven percent regard China’s economy as good (32% in 4Q13), and 33% expect improvement (38% in 4Q13). Nearly one third now see Europe improving in a year– a major sentiment shift. 

What is your company’s business focus for the next year? CFOs still indicate a bias toward “pursuing opportunity” over “limiting risk,” but there is a stronger risk focus this quarter. Growth is again biased toward new offerings and existing geographies.

Compared to the past 12 months, how do you expect your key operating metrics to change over the next 12 months?* Sales growth expectations rose slightly from last quarter’s survey low of 4.1% to 4.6% this quarter. Earnings expectations declined from 8.6% to a survey-low 7.9%. Capital spending held steady at 6.5%, but are below the survey average of 8%. Domestic hiring expectations declined to just 1.0% from last quarter’s 1.4%.

How does your optimism regarding your company’s prospects compare to last quarter? Coming off the first entire calendar year in which net optimism stayed positive, net optimism remained strong this quarter at +27 (down from +33 last quarter). But sentiment normally peaks early in the calendar year, and this quarter’s net optimism is the lowest for any first quarter on record.

Overall, what external or internal risk worries you the most?  Worries returned around the health and trajectory of both mature and developing economies. CFOs expressed worries that economies will falter due to weak growth and external shocks, and also about effects of slow job growth on consumer demand.

from page 13:

Domestic hiring expectations declined to just 1.0%, below last quarter’s 1.4% and among the lowest in the history of the survey. The median is again 0.0%, and variability of responses is very high. Forty-two percent of CFOs expect year-over-year gains (comparatively low), and 18% expect cuts (comparatively low).

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Among the various charts and graphics in the report are graphics depicting trends in “Own Company Optimism” and “Economy Optimism” found on page 6.

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I post various business and economic surveys because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not necessarily agree with many of the consensus estimates and much of the commentary in these surveys.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1857.62 as this post is written