What Landing? CFOs’ Economic Outlook Improves in First Quarter of 2024

March 27, 2024
CFO Survey_Q1 2024_Duke University's Fuqua School of Business, Federal Reserve Banks of Richmond and Atlanta

Financial decision-makers notably increased their expectations for real GDP growth in 2024, according to the results of The CFO Survey, a collaboration of Duke University’s Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta.

In the survey, which closed on March 8, CFOs also note an increase in labor-replacing automation.

CFOs revised upward their expectations for real GDP growth over the next four quarters to 2.2 percent, from 1.7 percent in the prior survey and 1.4 percent a year ago. Moreover, the probability respondents assign to negative year-ahead economic growth fell to 10 percent, from 31 percent during the second half of 2022.

Alongside stronger GDP growth expectations, CFO optimism about the overall U.S. economy increased to 61 on a scale from 0 to 100, its highest level since 2021Q2. The pickup in overall optimism is widespread, cutting across firm size and industry.

“CFOs have improved their economic outlook amid stronger realized growth in the U.S. economy,” said Atlanta Fed economist Brent Meyer. “Firms still face many challenges, including a tight labor market and persistent pricing pressures, but there is less concern over a downturn in economic growth compared with previous quarters.”

CFO optimism about their own firm’s financial prospects, which stands at a level of 69, increased slightly from last quarter. At the same time, over half of firms expect their price growth in 2024 to remain above pre-COVID levels, suggesting that for many firms, pricing pressures remain above what they consider normal.

The business spending picture has improved from historically low levels. The share of firms that increased spending (excluding capital expenditures) in the past three months rose to 47 percent, an increase of 4 percentage points from last quarter’s survey, though this remains far lower than the 66 percent that noted increased spending in a survey conducted this time two years ago. For capital expenditures, the share of firms planning investments over the next six months also edged higher since last quarter.

In a special question, more than half of respondent firms report implementing software, equipment, and/or other technology to automate tasks previously completed by employees. Among firms that automated tasks over the last 12 months, close to 40 percent noted that automation caused them to either slow the rate of new employee hiring, to decline to fill open positions, or to lay off employees.

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