CFO Business Sentiment Index - June 2023

Concerns over a host of issues — including debt ceiling wrangling, inflation, and labor shortages — appear to be driving executive uncertainty over the national economy, according to the latest CFO Business Sentiment Index. While worries over a national pullback dropped sharply to only 15% of respondents, down from one-third last month, only 23% see gains, down from some 26% last month. The “uncertain” faction ruled, with 39% in that camp, nearly double the percentage share in the prior period. CFOs’ macroeconomic concerns did not trickle down to their own industries, though, as 62% expect positive growth for their vertical, up from 44% last month. Only 15% forecast industry downturns, little changed from last month.

Executives cite geopolitical and supply chain-concerns as the top threat to the U.S. economy — 84% in this month’s Index, only slightly changed from 86% in the May report (within the overall category, geopolitical worries are replacing pandemic anxieties). Separately, although tax fears jumped to 8% in May — eclipsing employee acquisition and retention — they retreated to 2% this month, as worker-supply worries doubled to 13%.

Work-from-home and other remote arrangements continue to dull CFOs’ appetite for real estate — 50% look to jettison space, nearly double last month’s share. The remaining 50% are looking to rebalance their real estate portfolios, down from 60% last period. No one reported expansion plans this period.

Waning supply chain confidence appears to be driving more CFOs to take a cautious approach to inventory: only 31% will draw down on-hand stock levels, a sharp drop from 47% last month, while 61% say they’ll maintain inventory levels. Only 8% of executives, up one percentage point from last month, plan to add to on-hand inventory. And the Fed’s May interest-rate increase put a crimp in M&A plans, as 25% of executives see a slowdown, compared to 13% last month. Similarly, only 42% of executives see more combinations ahead, down from half last month. Another 33%, down slightly from May, see no change.

Economic instability appears to be inhibiting hiring plans, with only 23% of CFOs pointing to an increase, down from 27% in the previous period. Some 39% plan to shed employees, up nearly six percentage points from the previous Index report. About 38% see no employment changes, down slightly from 40% who said that last month.