CFOs’ optimism fades amid mixed economic signals


Inflation and rising interest rates dim finance leaders’ sentiments


Mixed economic signals had finance executives feeling quite pessimistic in the second quarter of 2022, according to Grant Thornton LLP’s CFO survey.


Inflation was still edging up, at 9.1% year over year in June in the last report before the survey was fielded, and interest rates were rising. But unemployment was continuing to fall, with the June jobs report showing 372,000 new jobs — and that was before the shocking July employment report showed a gain of 528,000 jobs.


The uncertainty related to these conflicting data points and other challenges continued to push down confidence in the economy among survey respondents. The percentage of CFOs who are optimistic about the U.S. economy over the next 6 months dropped from 49% in Q1 to 39% in Q2 — and that was down from 69% in the third quarter of 2021. Among those who were pessimistic about the prospects for the economy, inflation — and the steps the Fed is taking to fight it — topped the list of concerns. Other major worries included:

  • Increased costs of goods and services;
  • Higher energy costs;
  • The possibility that rate hikes will spark a recession;
  • The rising cost of capital; and
  • The potential for an inflationary wage spiral.

Lingering supply chain and inventory concerns also contributed to the depressed sentiment.


On the plus side, 65% of CFOs see the economic impact of COVID-19 waning, and 60% believe that increased household wealth will continue to drive demand.


But inflation is playing an outsized role in the current sentiment because it has the attention of policymakers as well as CFOs. The Fed continues to hike rates to cool the economy and slow price increases, announcing 75 basis point jumps in both June and July. Most CFOs responding to the Grant Thornton survey did not express confidence in the Fed’s ability to manage a soft landing for the economy, as almost three-fourths (72%) expect rate hikes to lead to a recession.


CFOs had stronger belief in their own companies’ ability to navigate the economic turbulence, as 66% of respondents still expect to meet their companies’ own growth goals — down from 67% in Q1. “For some companies, inflation may be helping to drive growth,” said Enzo Santilli, Grant Thornton’s Chief Transformation Officer. “Inflation can push revenue up even while volume is down. That can be good for some companies, but bad for others.”



One way to continue driving profits is to focus on cost control. This was not a priority in 2021, when CFOs were largely focused on rebuilding their workforce through a historically tight labor market and fighting novel supply chain challenges to maintain inventory.


“At the beginning of 2021, there was this sense that COVID was ending, and growth was going to ramp up. Businesses were far more confident about the economy and were loosening their belts a little,” said Sean Denham, National Audit Growth Leader and National SPAC Leader for Grant Thornton. “Now, with most expecting a recession, they’ve tightened their belts considerably.”



Enzo Santilli

Enzo Santilli is Grant Thornton’s chief transformation officer.

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