Tag Archives: Business

CEO Confidence Surveys 3Q 2018 – Notable Excerpts

On October 4, 2018, The Conference Board released the 3rd Quarter Measure Of CEO Confidence.   The overall measure of CEO Confidence was at 55, down from 63 in the second quarter. [note:  a reading of more than 50 points reflects more positive than negative responses]

Notable excerpts from this October 4 Press Release include:

CEOs’ assessment of current economic conditions is less positive, with 49 percent saying conditions are better compared to six months ago, down from 74 percent last quarter. However, 43 percent of CEOs say conditions have remained the same, and only 8 percent say conditions are worse. CEOs were also less optimistic about current conditions in their own industries compared to six months ago. Now, about 31 percent say conditions are better compared to 51 percent last quarter.

Looking ahead, CEOs’ expectations regarding the economic outlook are also less optimistic than last quarter. Now, just 23 percent expect economic conditions to improve over the next six months, compared to 48 percent in the second quarter. About 22 percent expect economic conditions will worsen, compared to 14 percent last quarter. CEOs’ expectations regarding short-term prospects in their own industries over the next six months were also less optimistic. Now, only 22 percent anticipate an improvement in conditions, down from 42 percent last quarter. Some 19 percent expect conditions to worsen, up from just 9 percent in the second quarter.

Last month, The Business Roundtable also released its CEO Economic Outlook Survey for the 3rd Quarter of 2018.   Notable excerpts from the release, titled “Business Roundtable CEO Economic Outlook Index Remains Strong, Declines Slightly in Q3“:

The Q3 2018 CEO Economic Outlook Index was 109.3, a decline of 1.8 points from 111.1 in the second quarter of 2018. At 109.3, the Q3 Index is the fifth-highest in the survey’s 16-year history and well above the historical average of 81.6. This is the seventh straight quarter where the Index has exceeded its historical average, signaling a continued positive direction for the U.S. economy.

also:

In their fourth estimate of 2018 U.S. GDP growth, CEOs projected 2.8 percent growth for the year, up slightly from their 2.7 percent estimate in the second quarter.

Additional details can be seen in the sources mentioned above.

_____

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

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2888.02 as this post is written

Deloitte “CFO Signals” Report Q3 2018 – Notable Aspects

Recently Deloitte released their “CFO Signals” “High-Level Summary” report for the 3rd Quarter of 2018.

As seen in page 2 of the report, there were 137 survey respondents.  As stated:

“Each quarter (since 2Q10), CFO Signals has tracked the thinking and actions of CFOs representing many of North America’s largest and most influential companies.

All respondents are CFOs from the US, Canada, and Mexico, and the vast majority are from companies with more than $1 billion in annual revenue. For a summary of this quarter’s response demographics, please see the sidebars and charts on this page. For other information about participation and methodology, please contact nacfosurvey@deloitte.com.”

Here are some of the excerpts that I found notable:

from page 3:

Perceptions

How do you regard the current/future status of the North American, European, and Chinese economies? Perceptions of North America declined, with 89% of CFOs rating current conditions as good (down from the survey high of 94% last quarter), and 45% expecting better conditions in a year (down from 52% and lowest in two years). Perceptions of Europe declined significantly to 32% and 23%, from 47% and 36%, respectively, and China declined to 37% and 27% from 55% and 31%. Page 6.

What is your perception of the capital markets? Seventy-three percent of CFOs say debt financing is attractive (same as last quarter). Attractiveness of equity financing increased for public company CFOs (from 36% to 42%) and for private company CFOs (from 45% to 53%). Seventy-one percent of CFOs now say US equities are overvalued—up from last quarter’s 63%. Page 7.

Sentiment

Overall, what risks worry you the most? CFOs express strong external concerns about geopolitical and economic events (especially around trade policy and interest rates). Similar to last quarter, they cite pressures to execute on their growth plans, voicing growing internal concerns about driving initiatives, and finding talent. Page 8.

Compared to three months ago, how do you feel about the financial prospects for your company? The net optimism index fell from last quarter’s +39 to +36 this quarter. Forty-eight percent of CFOs express rising optimism (same as last quarter), and 12% express declining optimism. Page 9.

Expectations

What is your company’s business focus for the next year? CFOs indicate a declining bias toward revenue growth over cost reduction (59% vs. 20%) and a slightly lower bias toward investing cash over returning it (56% vs. 19%). The bias toward current offerings over new ones shifted back to current offerings this quarter (43% vs. 37%), and the bias toward current geographies over new ones increased somewhat (67% vs. 16%). Page 10.

Compared to the past 12 months, how do you expect your key operating metrics to change over the next 12 months? Revenue growth expectations declined from 6.3% to 6.1%. Earnings growth declined from 10.3% to 8.1%. Capital investment slid from 10.4% to 9.4%. Domestic hiring fell from 3.2% to 2.7%. Dividend growth rose sharply from 4.8% to 7.4% (highest level in eight years). Page 11.

from page 9:

Sentiment

Optimism regarding own-companies’ prospects

After hitting a new survey high in 1Q18, net optimism fell for the second consecutive quarter—despite a sharp increase in optimism in Mexico; Services and Healthcare/Pharma improved, and Technology declined sharply.

Own-company optimism

Net optimism declined for the second straight quarter after hitting a new high in 1Q18. This quarter’s net optimism declined to +36 from +39, reaching its lowest level since 3Q17. CFOs expressing rising optimism remained unchanged from last quarter (48%), while CFOs citing pessimism increased to 12% (up from 9%).

Net optimism for the US declined from +42 last quarter to +35 this quarter, below the two-year average. Canada declined from +33 to +27, while Mexico rose sharply from zero to +67—the highest level in four years.

Sentiment was particularly strong in Services (+75, a new high) and T/M/E (+50).

Healthcare/Pharma rose sharply from -33 to +33, while Technology declined sharply from +52 to +17.

Please see the full report for charts specific to individual industries and countries.

from page 11:

Expectations

Growth in key metrics, year-over-year

Coming off multi-year highs, most key growth metrics declined, but remained strong. Mexico led growth expectations (similar to last quarter), and Canada lagged. Dividends rose sharply, driven largely by Retail/Wholesale and Energy/Resources.

Revenue growth declined from 6.3% to 6.1%, but remains at one of the highest levels in the last four years.

Earnings growth declined from 10.3% to 8.1%, the lowest level this year. The US declined, falling below its two-year average. Canada fell sharply to its lowest this year; Mexico also fell sharply, in line with its three-year average. Technology and Retail/Wholesale are highest; Energy/Resources and Services are lowest.

Capital investment declined from 10.4% to 9.4%, the second consecutive decline, but remains above the two-year average. The US fell from recent highs, but remains above its two-year average. Canada rose sharply and is above its twoyear average; Mexico rose sharply to its third highest level in the last six years. Energy/Resources and Retail/Wholesale are highest, Healthcare/Pharma and T/M/E are lowest.

Domestic personnel growth fell from 3.2% to 2.7%, but remains above its two-year average.

Dividend growth rose sharply from 4.8% to 7.4%, the highest level in eight years. The US rose to an eight-year high; Mexico rose to a four-year high; and Canada remained the same. Retail/Wholesale and Energy/Resources lead; Technology and T/M/E trail.

Please see the full report for charts specific to individual industries and countries.

Among the various charts and graphics in the report are graphics depicting trends in “Own Company Optimism” on page 9 and “Economic Optimism” found on page 6.

_____

I post various business and economic surveys because I believe they should be carefully monitored.  However, as those familiar with this site 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 2925.07 as this post is written

September 2018 Duke/CFO Global Business Outlook Survey – Notable Excerpts

On September 12, 2018 the September 2018 Duke/CFO Global Business Outlook was released.  It contains a variety of statistics regarding how CFOs view business and economic conditions.

In this CFO survey press release, I found the following to be the most notable excerpts – although I don’t necessarily agree with them:

The proportion of firms indicating they are having difficulty hiring and retaining qualified employees is at a two-decade high, with 53 percent of CFOs calling it a top four concern. That’s up sharply from the 41 percent who said the same thing last quarter.  “The tight labor market continues to put upward pressure on wages,” said Chris Schmidt, senior editor at CFO Research. “Wage inflation is now a top five concern of U.S. CFOs.” Employees are willing to leave their jobs for greener pastures. Over the past 12 months, U.S. CFOs report they had to replace 14 percent of their workforces, compared to 13 percent turnover in 2016.  Among companies that list hiring as a top concern, 56 percent have increased salaries to improve their chances of hiring and retaining workers; 31 percent have increased HR budgets to better advertise positions; 29 percent have increased vacation or flex hours; and 21 percent have improved health care benefits.

also:

The Optimism Index about the U.S. economy declined to 70 this quarter, compared to an all-time high of 71 last quarter, on a 100-point scale. CFO optimism about their own firms’ financial prospects increased to 71.4, the highest level since 2007. Optimism fell in Africa, Europe, and Latin America and held steady in Asia. The survey’s CFO Optimism Index is an accurate predictor of future hiring and overall GDP growth.

The CFO survey contains two Optimism Index charts, with the bottom chart showing U.S. Optimism (with regard to the economy) at 70, as seen below:

Duke CFO Optimism

It should be interesting to see how well the CFOs predict business and economic conditions going forward.   I discussed past various aspects of this, and the importance of these predictions, in the July 9, 2010 post titled “The Business Environment”.

(past posts on CEO and CFO surveys can be found under the “CFO and CEO Confidence” tag)

_____

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

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2893.98 as this post is written

Corporate Profits As A Percentage Of GDP

In the last post (“2nd Quarter 2018 Corporate Profits“) I displayed, for reference purposes, a long-term chart depicting Corporate Profits After Tax.

There are many ways to view this measure, both on an absolute as well as relative basis.

One relative measure is viewing Corporate Profits as a Percentage of GDP.  I feel that this metric is important for a variety of reasons.  As well, the measure is important to a variety of parties, including investors, businesses, and government policy makers.

As one can see from the long-term chart below (updated through the second quarter), (After Tax) Corporate Profits as a Percentage of GDP is at levels that can be seen as historically (very) high.  While there are many reasons as to why this is so, from a going-forward standpoint I think it is important to recognize both that such a notable condition exists, as well as contemplate and/or plan for such factors and conditions that would come about if (and in my opinion “when”) a more historically “normal” ratio of Corporate Profits as a Percentage of GDP occurs.  This topic can be very complex in nature, and depends upon myriad factors.  In my opinion it deserves far greater recognition.

(click on chart to enlarge image)

U.S. Corporate Profits As A Percentage Of GDP

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed August 29, 2018

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2908.12 as this post is written

2nd Quarter 2018 Corporate Profits

Today’s (August 29, 2018) GDP release (Q2 2018, 2nd Estimate)(pdf) was accompanied by the BLS Corporate Profits report for the 2nd Quarter.

Of course, there are many ways to adjust and depict overall Corporate Profits.  For reference purposes, here is a chart from the St. Louis Federal Reserve (FRED) showing the Corporate Profits After Tax (without IVA and CCAdj) (last updated August 29, 2018, with a value of $1968.509 Billion SAAR):

CP_8-29-18 1968.509

Here is the Corporate Profits After Tax measure shown on a Percentage Change from a Year Ago perspective:

CP_8-29-18 1968.509 6.7 Percent Change From Year Ago

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Corporate Profits After Tax [CP]; U.S. Department of Commerce: Bureau of Economic Analysis; accessed August 29, 2018; https://research.stlouisfed.org/fred2/series/CP

_________

I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2903.05 as this post is written

CEO Confidence Surveys 2Q 2018 – Notable Excerpts

On July 5, 2018, The Conference Board released the 2nd Quarter Measure Of CEO Confidence.   The overall measure of CEO Confidence was at 63, down from 65 in the first quarter. [note:  a reading of more than 50 points reflects more positive than negative responses]

Notable excerpts from this July 5 Press Release include:

CEOs’ assessment of current economic conditions was about the same as in the first quarter of 2018, with 74 percent saying conditions are better compared to six months ago. CEO sentiment was also virtually unchanged regarding the assessment of current conditions in their own industries, with about 51 percent saying conditions are better than six months ago.

Looking ahead, however, CEOs’ expectations regarding the economic outlook are much less optimistic than last quarter. Now, just 48 percent expect economic conditions to improve over the next six months, compared to 63 percent in the second quarter. CEOs’ expectations regarding short-term prospects in their own industries over the next six months were relatively flat, with only 42 percent anticipating an improvement in conditions.

Last month, The Business Roundtable also released its CEO Economic Outlook Survey for the 2nd Quarter of 2018.   Notable excerpts from the June 5, 2018 release, titled “Business Roundtable CEO Economic Outlook Index Eases, Remains Near Historic High“:

The Q2 2018 CEO Economic Outlook Index — a composite of CEO expectations for sales and plans for capital spending and hiring over the next six months — fell to 111.1 in the second quarter of 2018, declining 7.5 points from 118.6 in the first quarter. While this is the first time the Index has declined in nearly two years, the Index remains well above its historical average of 81.2 for the sixth straight quarter. This signals a continued positive direction for the U.S. economy despite modest declines in all three components of the Index. The new survey also shows a CEO projection of 2.7 percent U.S. GDP growth in 2018, a small decrease from the 2.8 percent projection last quarter.

CEO plans for hiring dipped slightly to 95.5, down 3.0 points from the previous quarter. Plans for capital investment fell to 107.6, a decrease of 7.8 points from Q1 2018. Expectations for sales fell to 130.3, a decrease of 11.6 points from last quarter.

Additional details can be seen in the sources mentioned above.

_____

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

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2791.19 as this post is written

Deloitte “CFO Signals” Report Q2 2018 – Notable Aspects

Recently Deloitte released their “CFO Signals” “High-Level Summary” report for the 2nd Quarter of 2018.

As seen in page 2 of the report, there were 172 survey respondents.  As stated:

“Each quarter (since 2Q10), CFO Signals has tracked the thinking and actions of CFOs
representing many of North America’s largest and most influential companies.

All respondents are CFOs from the US, Canada, and Mexico, and the vast majority are from
companies with more than $1 billion in annual revenue. For a summary of this quarter’s
response demographics, please see the sidebars and charts on this page. For other information
about participation and methodology, please contact nacfosurvey@deloitte.com.”

Here are some of the excerpts that I found notable:

from page 3:

Perceptions

How do you regard the current/future status of the North American, European, and Chinese economies? Perceptions of North America improved, with 94% of CFOs rating current conditions as good (up from 90% last quarter and a new survey high), and 52% expecting better conditions in a year (down from 59%). Perceptions of Europe declined to 47% and 36%, respectively (both metrics remain near their survey highs), and China rose to 55% (a new high) and 31%. Page 6.

What is your perception of the capital markets? Seventy-three percent of CFOs say debt financing is attractive (down from 77%). Attractiveness of equity financing decreased for public company CFOs (from 43% to 36%) and increased for private company CFOs (from 35% to 45%). Sixty-three percent of CFOs now say US equities are overvalued—the lowest level in two years. Page 7.

Sentiment

Overall, what risks worry you the most? CFOs express strong external concerns about US politics (especially around trade policy), while concerns about economic risks, which had subsided over the last few quarters, began to rise. They again cite pressure to execute on their growth plans, voicing growing internal concerns about driving initiatives and finding talent. Page 8.

Compared to three months ago, how do you feel about the financial prospects for your company? The net optimism index fell from last quarter’s survey-high +54 to +39 (still quite strong). Forty-eight percent of CFOs express rising optimism (down from 59%), and 9% express declining optimism. Page 9.

Expectations

What is your company’s business focus for the next year? CFOs indicate a survey-high bias toward revenue growth over cost reduction (67% vs. 17%) and a somewhat lower bias toward investing cash over returning it (56% vs. 18%).

The bias toward new offerings over current ones grew this quarter (40% vs. 35%), and the bias toward current geographies over new ones increased slightly (59% vs. 16%). Page 10.

Compared to the past 12 months, how do you expect your key operating metrics to change over the next 12 months? Revenue growth expectations rose from 5.9% to 6.3% (the highest level in nearly four years). Earnings growth rose from 9.8% to 10.3% (a three-year high). Capital investment slid from 11.0% to 10.4% (still among its six-year highs). Domestic hiring rose from 3.1% to 3.2% (a new high). Technology and Retail/Wholesale showed substantial improvement. Page 11.

from page 9:

Sentiment

Optimism regarding own-companies’ prospects

After hitting a new high last quarter, net optimism declined this quarter, but remains relatively strong—despite substantial weakness in Mexico and Healthcare/Pharma.

Net optimism hit a survey-high +50 in 1Q17, then another new high last quarter at +54. This quarter’s net optimism declined to +39— significantly down, but still quite strong by historical standards. Forty-eight percent of CFOs expressed rising optimism (down from 59%), and 9% cited declining optimism (up from 6%).

Net optimism for the US declined from +55 last quarter to +42 this quarter. Canada declined from +47 to +33, while optimism in Mexico fell sharply from +38 to zero.

Sentiment was particularly strong in Services and Technology—both of which came in above +50. Retail/Wholesale and Manufacturing both declined sharply from last quarter’s highs (both were above +60). Healthcare/Pharma declined sharply to -33.

Please see the full report for charts specific to individual industries and countries.

from page 11:

Expectations

Growth in key metrics, year-over-year

After hitting multi-year highs last quarter, key growth metrics continued to climb this quarter. Capital spending remained strong in the US, but weakened in Canada and Mexico. Technology, and Retail/Wholesale showed substantial improvement.

Revenue growth rose from 5.9% to 6.3%, its highest level in nearly four years. The US rose to a two-year high. Canada rose above its two-year average, and Mexico rose to a three-year high. Technology leads; Services and Manufacturing trail.

Earnings growth rose from 9.8% to 10.3%, its highest level in three years. The US declined slightly, but remains near its three-year high. Canada rose to its highest level in nearly four years, while Mexico rose to its five-year high. Technology* leads; Healthcare/Pharma trails.

Capital investment declined from 11.0% to 10.4%, but remains at one of the highest levels in the last six years. The US remained near its five-year high. Canada declined and is below its two-year average; Mexico declined sharply to near its two-year average. Manufacturing and Retail/Wholesale are again highest; Healthcare/Pharma and Technology are lowest.

Domestic personnel growth rose from 3.1% to 3.2%, a new survey high. The US remained at last quarter’s high; Canada rose to its second-highest level in five years; Mexico rose to its second highest level in three years. Technology and Retail/Wholesale lead; T/M/E* trails.

Please see the full report for charts specific to individual industries and countries.

* Please note that, due to a very small sample size,

T/M/E was not used as an industry comparison point.

Among the various charts and graphics in the report are graphics depicting trends in “Own Company Optimism” on page 9 and “Economic Optimism” found on page 6.

_____

I post various business and economic surveys because I believe they should be carefully monitored.  However, as those familiar with this site 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 2767.32 as this post is written

June 2018 Duke/CFO Global Business Outlook Survey – Notable Excerpts

On June 13, 2018 the June 2018 Duke/CFO Global Business Outlook was released.  It contains a variety of statistics regarding how CFOs view business and economic conditions.

In this CFO survey press release, I found the following to be the most notable excerpts – although I don’t necessarily agree with them:

The Optimism Index in the U.S. remained at an all-time high of 71 on a 100-point scale this quarter. Optimism fell in Africa, Asia, Europe, and Latin America. The survey’s CFO Optimism Index is an accurate predictor of future hiring and overall GDP growth.

“This increased U.S. optimism appears to have increased expectations for M&A activity,” Graham said. “More than 70 percent of CFOs expect more mergers and acquisitions to occur over the next year.”

also:

The proportion of firms indicating they are having difficulty hiring and retaining qualified employees remains near a two-decade high, with 41 percent of CFOs calling it a top concern. The typical U.S. firm says it plans to increase employment by a median 3 percent in 2018 and expects wages to increase 4 percent on average.

“The tight labor market continues to put upward pressure on wages,” said Chris Schmidt, senior editor at CFO Research. “Wage inflation is now a top five concern of U.S. CFOs.”

Wage growth should be strongest in the tech, transportation, and service/consulting industries. U.S. companies expect the prices of their products to increase by more than 3 percent over the next year.

The CFO survey contains two Optimism Index charts, with the bottom chart showing U.S. Optimism (with regard to the economy) at 71, as seen below:

Duke CFO Optimism chart

It should be interesting to see how well the CFOs predict business and economic conditions going forward.   I discussed past various aspects of this, and the importance of these predictions, in the July 9, 2010 post titled “The Business Environment”.

(past posts on CEO and CFO surveys can be found under the “CFO and CEO Confidence” tag)

_____

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

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2775.63 as this post is written

Corporate Profits As A Percentage Of GDP

In the last post (“1st Quarter 2018 Corporate Profits“) I displayed, for reference purposes, a long-term chart depicting Corporate Profits After Tax.

There are many ways to view this measure, both on an absolute as well as relative basis.

One relative measure is viewing Corporate Profits as a Percentage of GDP.  I feel that this metric is important for a variety of reasons.  As well, the measure is important to a variety of parties, including investors, businesses, and government policy makers.

As one can see from the long-term chart below (updated through the first quarter), (After Tax) Corporate Profits as a Percentage of GDP is at levels that can be seen as historically (very) high.  While there are many reasons as to why this is so, from a going-forward standpoint I think it is important to recognize both that such a notable condition exists, as well as contemplate and/or plan for such factors and conditions that would come about if (and in my opinion “when”) a more historically “normal” ratio of Corporate Profits as a Percentage of GDP occurs.  This topic can be very complex in nature, and depends upon myriad factors.  In my opinion it deserves far greater recognition.

(click on chart to enlarge image)

Corporate Profits As A Percent Of GDP

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed May 30, 2018

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2728.14 as this post is written

1st Quarter 2018 Corporate Profits

Today’s (May 30, 2018) GDP release (Q1, 2nd Estimate)(pdf) was accompanied by the BLS Corporate Profits report for the 1st Quarter.

Of course, there are many ways to adjust and depict overall Corporate Profits.  For reference purposes, here is a chart from the St. Louis Federal Reserve (FRED) showing the Corporate Profits After Tax (without IVA and CCAdj) (last updated May 30, 2018, with a value of $1811.844 Billion SAAR):

Corporate Profits After Tax

Here is the Corporate Profits After Tax measure shown on a Percentage Change from a Year Ago perspective:

Corporate Profits After Tax Percent Change From Year Ago

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Corporate Profits After Tax [CP]; U.S. Department of Commerce: Bureau of Economic Analysis; accessed May 30, 2018; https://research.stlouisfed.org/fred2/series/CP

_________

I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2727.09 as this post is written