CFO Business Sentiment Index - November 2023

A perfect storm of conflict in the Middle East and stubbornly high interest rates appear to be weakening executive confidence, according to the latest CFO Business Sentiment Index.

After climbing steadily, the share of CFOs who are “positive” about the path of the national economy abruptly fell from 83% in September to only 39% in the November sentiment survey, while the “negative” share rose to 10%, from zero. The bleak national outlook dented executives’ confidence in their own verticals: only 62% see growth ahead for their industry, down from 67% in September, while 6% forecast a pullback.

Executives see global issues and China concerns as the top (21% share) threat to the U.S. economy, followed closely by inflation and domestic conflicts (each at 16%).

Employee acquisition and retention worries edged lower but remain elevated with an 8% share, followed closely by nervousness over military conflicts (7%), terrorist threats and government over-regulation (6% each). Supply chain and tax apprehension eased to 4% this quarter. Energy costs, environmental, taxes, healthcare and pandemic-related issues rounded out the list.

Demand for real estate took a hit, with only 9% of executives looking for new space (down from 20% at the beginning of the quarter), as 40% plan to downsize their real estate holdings (unchanged during the quarter). A slight majority (51%) of CFOs say they’ll rebalance their portfolio (up 11 percentage points during the quarter).

Inventory appetite abated during the quarter, with only 13% of respondents planning to expand on-hand levels, down from 17% at the start of the quarter. More respondents (27%) plan trims, although that’s down from 33% at the beginning of the quarter. The majority of executives, 60%, plan no changes, up from 50% at the beginning of the quarter.

More executives — 50%, up from 33% at the start of the quarter — are looking to boost efficiency with M&As, while only 10%, down from one-third, see a drop. On- the-fence executives who see no change in their inventory level accounted for a 40% share, up a hair from one-third last month.

Hiring plans continued to gain steam in the quarter with 32% of executives planning to expand their headcount, nearly doubling during the period. Only 32% plan to trim their workforce, down from 50% at the start of the quarter. And more CFOs (77%) are embracing artificial intelligence, up from half at the start of the quarter.