CFO Survey: Weak Business Spending Forecast; Employment Growth Continues

December 9, 2015
Finance, Management


Business spending will be weak in 2016 because of slowing growth in China and low oil prices, according to a new survey. At the same time, employment should continue to make steady gains. These are key factors for the Federal Reserve in considering an interest rate hike later this month.

The latest Duke University/CFO Global Business Outlook also explores the economic effects of the refugee crisis in Europe and the weak outlook in Latin America and Africa.

The survey, which ended December 4, has been conducted for 79 consecutive quarters and spans the globe, making it the world's longest-running and most comprehensive research on senior finance executives. Results are for U.S. firms unless otherwise noted.


U.S. firms will increase capital spending 2.6 percent in 2016, and research and development slightly more than 3 percent. Spending will fall by more than one-third in the energy sector and remain flat in services and consulting, transportation and technology.

"U.S. companies indicate that slowing growth in China, along with low energy prices and a strong dollar among export firms, is curtailing spending plans," said John Graham, a finance professor at Duke's Fuqua School of Business and director of the survey. "Interestingly, increased regulation is the most significant negative factor for some firms, while spending at other firms will increase in response to new regulatory requirements.

"While weak business spending may give the Fed pause in the timing and magnitude of pending rate hikes, CFOs have indicated that a small interest rate increase will not derail spending plans."

The most common plans among companies that expect to accelerate spending are repositioning of the firm, replacing obsolete equipment, implementing new technology and expansion due to growth.

Business spending will increase by less than 3 percent in Latin America, though it will range from 5 percent in Mexico to a reduction of 5.5 percent in Brazil. Businesses are expected to increase spending by 3.7 percent in Europe and a median 5 percent in Africa and Asia (outside China and Japan), though in China spending is expected to rise less than 2 percent.


Two-thirds of firms expect to increase employment in 2016, with the increase averaging about 2 percent. Employment growth will be strongest in services/consulting, retail/wholesale and construction. Manufacturing employment should shrink 1 percent. 
CFOs list the difficulty in attracting and retaining qualified employees as one of their top three overall business concerns.

U.S. firms expect to hike wages 2.9 percent in 2016.

"Next week's rate decision is a sure thing and attention will shift to the Fed's next move," said Fuqua professor Campbell R. Harvey, a founding director of the survey. "The projected surge in employment that CFOs anticipate makes it highly likely there will be additional rate hikes sooner rather than later. Two percent growth in employment could easily push the unemployment rate below 4 percent -- a rate that we have not seen since 2000."


Sparse spending on new assets will lead to an aging of the stock of assets in place. Fifty-four percent of U.S. firms say their assets are aging at a moderate or faster rate. Forty percent of these companies say aging assets reduce their overall productivity.

Other factors have dampened productivity growth. Nearly 60 percent of U.S. firms say that regulation has negatively affected productivity, and nearly half say that weak economic conditions have hurt.

Several factors have positively influenced productivity. More than 80 percent of CFOs say that automation and technology have made their operations more productive and nearly 80 percent also say process changes have improved efficiency.

"Technology-enabled process improvement has been a focus for a lot of firms over the last several years," said David W. Owens, editorial director for CFO Research, "but finance executives are clear that they believe even more gains are needed."


European CFOs have a mixed reaction to the refugee crisis. A majority believe the refugees entering Europe will have a positive impact on the economy. Nearly 60 percent say that accepting migrants will help solve the looming demographic problems their nations face, and by a 55-to-34 percent margin believe the overall economic impact will be positive.

The CFOs also recognize the costs and challenges presented by the influx of refugees. Eighty-one percent say they think European leaders have mismanaged the crisis. A majority (55 percent) believe refugees will increase competition for jobs and drive down wages.
Nearly 40 percent say their own firms would be willing to hire refugees to help with the crisis, while nearly 30 percent say their firms would not.


CFO optimism about the U.S. economy remained steady this quarter and remains among the strongest in the world. Still, optimism has declined since the first half of 2015. On a scale of zero to 100, financial executives rate the outlook at 60, down from 65 in the spring. Business spending is expected to remain somewhat soft, but hiring will remain steady. Top concerns in the U.S. include economic uncertainty, difficulty finding qualified employees, regulatory requirements and costs of benefits. Executives expect health care spending to increase by more than 7 percent in 2016. Data security continued its steady rise as an important concern.

Canadian optimism mirrors the U.S. at 59. Canadian CFOs expect median employment growth of 1 percent and capital spending growth of 3.7 percent.

Last quarter was the first time optimism in Asia was lower than in North America and Europe. Asian optimism outside of Japan remained low this quarter at 54, down from 63 in early summer. Capital spending is expected to rise a median 4 percent in Asia with China included, and wages are expected to rise by about 7 percent across Asia. Full-time employment is expected to decrease in China and Japan and increase by 2.3 percent in the rest of Asia. Top concerns include economic uncertainty, currency risk and governmental policies. Chinese CFOs are also worried about productivity.

Optimism about the economy remained steady in Europe (58). Capital spending, employment and wages are all expected to increase more than 3 percent. European top concerns include economic uncertainty and weakness, currency risk and difficulty attracting the right employees. Forty-three percent of European firms say their assets continue to age, relative to only 17 percent that say the asset stock is growing younger.

African optimism increased slightly this quarter (from 48 to 49). Employment is expected to increase by 3.2 percent and wages by about 7 percent in 2016. Capital spending is expected to rise by a median 5 percent. More than half of African firms indicate their asset stock is aging, implying that more investment in new assets is required. African CFOs are worried about currency risk, economic uncertainty and government policies and regulations.

Latin American economic optimism remains lowest in the world (46 on a 100-point scale), though it is a region of contrasts. Optimism in Brazil and Chile remains low at 42, but strong in Mexico (64). Full-time employment and spending are both expected to fall by more than 5 percent in Brazil, while increasing by about 2 percent in Mexico. The strong U.S. dollar is having a net positive effect in Mexico.
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Detailed results, including tabular summaries of the numbers in this release and results from previous surveys are available at

About the survey: This is the 79th consecutive quarter the Duke University/CFO Global Business Outlook survey has been conducted. The survey concluded December 4, and generated responses from more than 1,000 CFOs, including 500 from the U.S. and Canada, 118 from Asia, 101 from Europe, 250 from Latin America and 61 from Africa. The survey of European CFOs was conducted jointly with TiasNimbas in the Netherlands ( and ACCA, based in the U.K. The survey of Latin America was conducted jointly with Fundação Getúlio Vargas (FGV) in Brazil (, and with Universidad Andina Simon Bolivar in Ecuador. The Japanese survey was conducted jointly with Kobe University ( and Tokyo Institute of Technology, among others. The African survey was conducted jointly with SAICA (

The Duke University/Global Business Outlook survey polls a wide range of companies (public and private, small and large, many industries, etc.), with the distribution of responding firm characteristics presented in online tables. The responses are representative of the population of CFOs that are surveyed. Among the industries represented in the survey are retail/wholesale, mining/construction, manufacturing, transportation/energy, communications/media, technology, service/consulting and banking/finance/insurance. The average growth rates are weighted by revenues or number of employees. For example, one $5 billion company affects an average as much as 10 $500-million firms would. Revenue-weighted mean growth rates are provided for earnings, revenues, capital spending, technology spending and prices of products. Employee-weighted mean growth rates are used for health care costs, productivity, number of employees and outsourced employment. The earnings, dividends, share repurchases and cash on balance sheet are for public companies only. Unless noted, all other numbers are for all companies, including private companies.

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