Dive Brief:

• Trade and tariff uncertainty has taken a toll on CFO planning, Deloitte’s latest CFO Signals survey shows. 
• Ninety-seven percent of CFOs surveyed at the end of the fourth quarter believe the United States will see a downturn by the end of 2020, and could even be entering one now.
• All growth expectations in the survey’s slate of business metrics are at or near multiyear lows: revenue growth is at 3.7%, down from 4.3%, earnings growth is at 6%, the second-lowest on record, and capital spending is at 3.7%, remaining near a three-year low. 

Dive Insight:

The cloudy outlook is reflected in the strategies CFOs are pursuing to prepare their companies for a downturn. More than half have reduced spending and more than one-third have lowered headcount.  

"What the survey shows is the concern over trade policy and tariffs," Sanford ("Sandy") Cockrell, Deloitte's global CFO program leader, told CFO Dive. "Correlated against this demographic of companies [large multinationals], it is a huge concern."

Cockrell said the findings reflect sentiment at the end of last year, when CFOs were putting the finishing touches on their 2020 budget projections, and reflect the difficulties of trying to plan in an environment of unpredictable trade and tariff policy. 

"Most all of these companies are calendar-year companies and they just came off of their 2020 planning cycle," he said. "The complications of figuring out what [unpredictable trade and tariff policy] does to your international supply chains, margins and profitability is really hard. There’s a sense of frustration. I sense that in clients I work with every day. Not having the clarity to plan and budget properly. That’s got to do with this."

In response to the uncertain outlook, CFOs pursuing more defensive positions are looking to make budget cuts.

"The first place they look is around discretionary spending," he said. "So, travel budgets, training — these are some of the first places to go. Secondly, over a third said they are reducing headcount. And they will reduce hiring."

They’re also delaying investment, incorporating cost controls, and otherwise finding cuts on the margin. 

"It’s always hard to lower spending in a less disruptive way," he said. "2020 budgets were constructed with the view that we were going to have a downturn, so companies across the board were already building into their budgets either no increases in spending or were looking for certain targets for the business to find some savings."