Deloitte “CFO Signals” Report 3Q 2012 – Notable Aspects

Recently Deloitte released their “CFO Signals” “high-level” report for the 3rd Quarter of 2012.

As seen in page 2 of the report, “Eighty-five CFOs responded during the two weeks ended August 24. More than 75% are from public companies, and 80% are from companies with more than $1B in annual revenue.”

Here are some excerpts that I found notable:

from page 4 :

CFOs’ expectations for sales and earnings growth both dropped precipitously this quarter, and their expectations for capital investment and hiring followed suit.


This quarter’s survey results show that global economic developments have taken a large toll on CFOs’ expectations for their home economies. In the U.S., more than 80% of CFOs believe their economy is either stalling or about to stall, and the proportion is about 65% for both Canada and Mexico.  This pessimism is driving the strongest economic concerns we have seen in this survey. Nearly 60% of CFOs mention U.S. or global economic conditions as their most worrisome risk, and one third of those CFOs specifically mention European conditions.


But this quarter’s CFO expectations appear to confirm the case for worry – especially in the U.S. Sales growth expectations of 4.8%* are a new survey low –well below the previous low of 5.9%* in the first quarter of this year. U.S. expectations are just 4.3%* (6.7%* last quarter), with Canada and Mexico both at about 6.5%* (they were 5.9% and 8.7% last quarter, respectively).  Earnings growth expectations also declined, with this quarter’s 8.0%* a new survey low – well below last quarter’s 10.5%*. The median expectation fell from 8.5%* to just 6.0%* (another survey low). U.S. estimates are lowest at 7.2%* (12.3%* last quarter), with Canada at 8.1%* (4.6%* last quarter) and Mexico at 8.9% (11.7%* last quarter).

from page 5, regarding “Investment and hiring estimates tumble” :

Capital investment growth expectations, for example, fell precipitously from 11.4% to just 4.7% this quarter – well below the previous low of 8%. Just over half of CFOs expect gains at all, and the median expectation is now just 3% (also survey lows).  Hiring also took a major hit, with domestic hiring expectations falling to another survey low at just 0.6%.

from page 11, regarding “Economy” :

Just over half of U.S. CFOs believe the economy is still growing, but nearly three quarters of those CFOs believe it is beginning to stall. Moreover, about 45% believe the economy is already stalling, and just under one third of those CFOs believe a contraction is next. Together, this means that more than 80% of U.S. CFOs expect their economy to stall or contract.

from page 15, regarding “Industry – Top Challenges” :

Pricing trends maintained the top spot this quarter, continuing its threequarter rise to 50%. They are a top-two concern in all sectors except Financial Services.


Market contraction concerns rose to 36% (driven mostly by high importance in Manufacturing and Technology), and overcapacity and excess inventoryconcerns held steady at 23% (with high importance in Manufacturing). Market growth challenges held steady at 23% and are a top-two challenge for Financial Services.

from page 16, regarding “Company – Top Challenges” :

Revenue from existing markets again tops this quarter’s list with 58% of all CFOs naming it a top challenge – roughly the same percentage as last quarter. It is again the top company challenge for all industries – a phenomenon that occurred for the first time last quarter. Revenue from new markets held steady at a survey-low 21%, consistent with a possible scaling back of geographic expansion in response to conditions in Europe and Asia.


I post various business and economic surveys because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not necessarily agree with many of the consensus estimates and much of the commentary in these surveys.


The Special Note summarizes my overall thoughts about our economic situation

SPX at 1433.32 as this post is written