Financial leaders expect 1.0% GDP growth and highlight challenges faced by small firms
According to a recent report released by Duke University’s Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta, chief financial officers (CFOs) are predicting a slightly slower growth trajectory for the US economy. The CFO Survey indicates a lowering of growth expectations for the country’s gross domestic product (GDP) in the next year, with a revised forecast of 1.0% compared to the previous quarter’s projection of 1.4%.
As part of the survey, CFOs were asked to rate their optimism about the overall US economy on a scale of zero to 100. The average response remained relatively stable at 54.8, aligning with the findings from the first-quarter survey. However, a notable difference emerged among participants who responded after the debt ceiling resolution passed Congress on May 31. Among this group, the average optimism rating rose to 57.4. In contrast, respondents who had answered before the resolution reported an average optimism rating of 51.5. The resolution on the debt ceiling positively impacted the optimism levels of CFOs regarding the financial prospects of their own firms.
Sonya Ravindranath Waddell, an economist at the Richmond Fed, stated, “Financial leaders of firms became decidedly more optimistic about the US economy and their own prospects without the fear that Congress would not come to an agreement on the debt ceiling.” Despite this increased optimism, financial decision-makers still maintained their expectations for slower GDP growth in the upcoming year.
The survey also shed light on the contrasting situations faced by small and large firms. Approximately 40% of small firms, defined as those with fewer than 500 employees, expressed concerns about tighter financing conditions limiting their business spending. This figure stands in contrast to about a quarter of large firms facing similar constraints. Additionally, small firms were more likely than their larger counterparts to report difficulties in replacing or repairing capital assets and refinancing debts due to the prevailing financing conditions.
The findings of the CFO Survey indicate a nuanced outlook among financial leaders, with increased optimism regarding their own firms but a recognition of the challenges posed by slower GDP growth. Furthermore, small businesses appear to be grappling with a more challenging environment in terms of revenue growth and financing compared to larger firms.