CFOs preparing for economic slowdown as 2020 election looms

About 12% of finance officers said they believe a downturn has already commenced

A majority of North America’s top financial executives expect the U.S. economy to slow down by the end of 2020 as the presidential election — and the uncertainty that accompanies it — looms large.

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That’s according to a new study published on Wednesday by Deloitte, which found that 97 percent of North American CFOs are anticipating an economic downturn to begin (or believe one has already taken hold) in 2020, though few are forecasting a true recession.

“The good news is that recession expectations have fallen sharply,” the report said.

About 12 percent of finance officers said they believe a downturn has already commenced -- almost double the level from the first quarter of 2019 -- while just 3 percent don’t expect to see a cooler economy this year.

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Still, the U.S. economy remained a bright spot for the 147 CFOs polled: About 30 percent think it will improve over the course of the next year, though trade policy remained worrisome for the executives, even with the promises of a phase one trade deal between the U.S. and China.

Plus, two-thirds of respondents said the U.S. economy’s performance in 2021 depends on the outcome of the November election. While President Trump has hinged his reelection campaign on the strength of the economy, Democratic presidential candidates Bernie Sanders and Elizabeth Warren, who are in second and third in national polls, have vowed to make sweeping changes to the current economic system.

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Perceptions of the North American economy as “good” rose to 68 percent in the fourth quarter of 2019, the study found, while perceptions of the Chinese economy fell to 18 percent.

Although optimism for their businesses rose to 11 in the final quarter of the year, it remained among the lowest levels in the past three years. Geopolitical events continued to rattle CFOs' confidence, with executives saying they worried about trade policy, political turmoil, competition, consumer demand and the impending U.S. elections.

“This quarter saw even higher concerns about political turmoil, with growing use of the term ‘instability’ and increased mentions of the potential impacts of the 2020 U.S. elections,” the report found. “CFOs also mentioned growing worries about consumer demand and business spending.”

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Finance chiefs also are facing a battle to hire competent workers: There’s a slowing availability of workers across the enterprise in a historically tight labor market (unemployment remains at a half-century low). In fact, CFOs pointed to a talent shortage as the dominant constraint on their companies’ performance.