Economic indicators are looking up, but don’t tell that to CFOs. Findings from a study by Duke University show that while corporate CFOs are increasingly bullish, this isn’t translating to their plans to hire or utilize cash reserves. Perhaps it’s due to economic uncertainty or the political healthcare hubbub in Washington, but indicators show that CFOs are as cautious as ever.
With the holiday season almost in full swing, a measly 10 percent of CFOs have any intention of hiring in the fourth quarter. This is down from 12 percent during the third quarter. An additional 67 percent say that they intend to maintain staffing levels compared to 70 percent of CFOs last year.
Despite a cautious approach to hiring and growth, most financial executives recognize the positive business prospects in the fourth quarter. A few notable trends include:
- Business investments are down. The latest readings place business investments at just 0.4 percent, and capital spending is 4 percent lower than the pre-recession levels.
- “A crisis of confidence.” With GDP growth at 1.8 percent, many businesses are taking a wait-and-see approach. Rising interest rates aren’t totally unexpected, but they’re causing worries among corporate executives nonetheless. There are also widespread concerns about business corruption.
- The trend is global. While optimism is rising, the sense of caution is unified with CFOs across the globe. The reality is that sales and growth expectations are still below what the long-term goals and averages had previously been.
As CFOs employ a cautious strategy, businesses are building stronger portfolios than ever. The cash and investment balances for non-financial companies in the S&P 500 stand at a monumental $1.27 trillion, which is 6.1 percent higher than last year. Coupled with higher savings, CFOs are also dampening earnings expectations.
Still, despite caution and practical considerations, CFOs remain a prominent figure in the pursuit of growth. The reality is that despite which avenue of growth is pursued, the CFO will have the influence in analyzing the portfolio and determining where the strategy should head. With today’s uncertain economy and political battles, it’s likely that CFOs will focus on sustainability and practical businesses practices for quite some time to come.