Even before the bond yield inverted and the Federal Reserve sounded a cautious note for the year ahead, some of North America’s top finance executives stressed the increasing likelihood of an economic downturn in the U.S.
According to a new study published on Wednesday by Deloitte, nearly three-fourths of CFOs said they expect a deceleration of economic activity by the end of 2020; however, of those surveyed, only 15 percent anticipated an outright recession.
That’s largely because the U.S.-China trade war, the length of business and credit cycles and slowing growth in China and Europe. The CFOs also cited concerns about rising interest rates, although the Fed has signaled it likely won’t raise the benchmark federal funds rate for the remainder of 2019, declining consumer confidence and political concerns.
Despite the high number of executives who believe a downturn is coming, less than half said they have a defensive plan in place, according to the study. About 39 percent of CFOs said their company had a detailed plan for a downturn, while 28 percent said they have already begun to take defensive steps.
“Prior to 2017, CFOs’ top external risks focused heavily on slow economic growth,” the study said. “As global economic performance improved, CFOs’ top worries shifted toward threats to continued growth -- especially trade policy/tariffs and political turmoil.”
Of the 151 respondents, 58 CFOs said they were most worried by the current U.S. trade policy, in addition to tariffs. Following that were 31 CFOs, who said they were most worried about an economic risk and slowdown.
The sentiment has been echoed by other studies, including a survey published in January by the Conference Board that found CEOs view a recession as their biggest external concern for 2019. Ccomparatively, in 2018, CEOs ranked the threat of a recession an afterthought, ranking it as their 19th most vital concern.