Economic optimism rises among CFOs

Finance leaders at larger companies are beginning the new year with renewed optimism.

Almost three-fourths of CFOs think the economy will improve over the next year, according to Deloitte’s fourth quarter 2024 North American CFO Signals survey, dramatically up from 19% in the third quarter.

The survey found that 72% of finance leaders are confident about economic conditions, possibly because of the presidential election and a second Federal Reserve interest rate reduction in November, when the poll was conducted. The Fed made a third cut in December.

“It’s possible that finance chiefs are relieved that the U.S. election is settled,” according to the survey, “which may provide a degree of certainty about what’s ahead.”

The survey polled 200 CFOs at companies with more than $1 billion in annual revenue.

As for their own organizations, 59% said they were “significantly or somewhat more optimistic,” up 20 points from two quarters earlier. Only 8% said they are “significantly or somewhat less optimistic” about their company’s future, down from 29% the previous quarter.

Other findings in the survey:

• About 46% of CFOs said they will use capital reserves to add to their cash balance. Other top priorities include increasing dividends (44%), allocating or reallocating capital to new business investments (44%), and funding acquisitions (43%).

• Finance leaders expect a 7.3% increase in domestic wages and salaries over the next 12 months compared with the previous 12 months. That’s almost double the predicted increase from the third quarter.

• CFOs plan to adjust compensation and benefits to manage employee costs. Among the possible solutions: hire or promote from within the company (49%), tie some proportion of compensation to performance (49%), and change benefits or transfer some of the costs to workers (47%).

• Regarding changes they expect in the coming 12 months, 47% of CFOs said their organizations would explore options for relocating parts of their global value chain. Other top choices were increasing deployment or spending on generative artificial intelligence in finance (46%) and accelerating decarbonization efforts (43%).

— To comment on this article or to suggest an idea for another article, contact Kevin Brewer at Kevin.Brewer@aicpa-cima.com.