Less than half of CFOs are optimistic about the economy, three-fourths anticipate recession

Nearly three-fourths of chief financial officers expect interest rate hikes to lead to recession. Moreover, only about 40% have a positive outlook about the U.S. economy over the next six months, compared with nearly 70% a year ago, a new survey from Grant Thornton finds.

The top five reasons for this pessimism are:

• Increasing costs for goods and services, 73%
• Increasing energy costs, 71%
• Supply chain challenges, 66%
• Interest rate increases, 64%
• Increased cost of credit and capital, 61%

“The CFOs we surveyed are primarily concerned about cost, not demand”, says Christopher Schenkenberg, a Grant Thornton partner and national business line leader of the firm’s tax practice. “That’s exactly what I’m hearing from clients, too. Among our respondents, 71% are confident on demand, but only 57% are confident about controlling costs.”

As interest rates rose throughout the summer, CFO optimism continued to plummet and with it, CFO expectations. Of the 61% expecting increased profits, only 15% expect growth of more than 10% — and 39% of CFOs expect a contraction. Of that group, 30% expect contraction of less than 10%, while 9% of respondents expect their businesses to contract by more than 10%.

Many CFOs are concerned inflation will have a trickle-down effect on their ability to meet goals in key areas. This is especially evident in supply chain concerns. Only 54% of CFOs are confident they will meet their supply chain goals, down from 67% in the first quarter. As a result, cost control is top of mind for many CFOs, a prospect that may sting business leaders who were hoping the COVID-19 rebound of 2021 would carry over into 2022.

Forty-one percent of CFOs say cybersecurity will be their top challenge over the next six months, while supply chain (37%) and the remote workforce (32%) came in second and third, respectively, on the list of top three concerns. Although other challenges have ebbed and flowed over the last year, supply chain have steadily risen 13 percentage points since the start of 2021.

Read more: CFOs fear impact of inflation on health benefits costs

Cash and liquidity saw the biggest quarter-to-quarter jump, leaping from 19% in the firm’s first quarter survey to 31% in the new findings. CFOs also are concerned about attracting and retaining talent: 62% say a possible recession will pose a significant challenge to their recruitment and retention efforts.

On the positive side, 65% of the CFOs surveyed believe the economic impact of COVID-19 is waning — an increase of 15 percentage points from the previous survey. Two-thirds of those surveyed expect their companies will meet growth goals, and 61% expect an increase in net profits over the next 12 months.