Deloitte “CFO Signals” Report Q2 2014 – Notable Aspects

Recently Deloitte released their “CFO Signals” “High-Level Summary” report for the 2nd Quarter of 2014.

As seen in page 2 of the report, “One hundred and thirteen CFOs responded during the two-week period ending May 23. Seventy-one percent of 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:

Which external factors will substantially drive and/or impede your company's performance over the next year? The North American economy,industry factors, and technology advancements repeat as the top tailwinds. Policy,regulation, and talent costs are the top impediments.

How do you regard the current and future status of the North American, Chinese, and European economies? Views of North America declined slightly with 40% now describing conditions as good (42% last quarter), and 60% expecting better conditions in a year (62% last quarter). Twenty-four percent regard China’s economy as good (well below last quarter’s 37%), and just 21% expect improvement (33% in 1Q14). Just 7% now describe Europe as good, and only 27% see it improving over the next year.

What is your company’s business focus for the next year? CFOs still indicate a bias toward “pursuing opportunity” over “limiting risk,” and 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 significantly from last quarter’s 4.6% to 6.1% this quarter. Overall, earnings expectations bounced back from a survey-low 7.9% last quarter to 8.9% this quarter, but expectations declined among U.S. CFOs. Capital spending rose slightly to 6.8%, but U.S. CFOs’ expectations declined from last quarter. Domestic hiring expectations rebounded from last quarter’s 1.0% to 1.6%.

How does your optimism regarding your company’s prospects compare to last quarter? Coming off of five straight net-positive quarters, net optimism held steady this quarter at +26. Sentiment declined substantially, however, for Manufacturing CFOs.

Overall, what external or internal risk worries you the most? Worries about economic health and government policy are still common, but industry- and company-level concerns ramped up steeply this quarter.

from page 13:

Domestic hiring expectations rebounded from last quarter’s 1.0% to 1.6% this quarter. The median rose to 1.0%, and 58% of CFOs now expect year-over-year gains—well above last quarter’s 42% and the highest level we have seen in two years. Just 16% expect cuts (comparatively low). Variability of expectations matches the lowest levels in the survey’s history.

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Among the various charts and graphics in the report are graphics depicting trends in “Own Company Optimism” and “Economic 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 1967.56 as this post is written