CFO’s Economic Forecast

CNBC’s Global CFO Council is a group of the world’s top CFO’s, and this group issues quarterly outlooks for the largest global economies, as well as other economic forecasts.  These outlooks occur in categories such as “improving”, “modestly improving”, “stable” and “modestly declining”.  China’s economy continues to get the highest “grades”.

As we all know, the global coronavirus has depressed virtually all economies one way or another, and in the US, for example, such businesses as travel, hospitality, restaurants and personal services generally have been devastated.  The 2nd quarter of 2020 saw the largest decline since the government began record keeping.

The biggest concern of the CFO group is further outbreaks of covid, and success with vaccines will be the greatest positive factor for 2021.   Specifically, “Sixty-five percent of global CFOs say the promise of a Covid-19 vaccine becoming widely available by next year’s Q2 will have the greatest impact on their plans for 2021, while around 21 percent say the current Covid case surge will have the greatest impact on plans for next year”.

China, if their data are to be believed, has been significantly more effective in curtailing the effects of the coronavirus, and the CFO Council’s outlook for China’s GDP for the 4th quarter of 2020 was moderately improving.  This is an improved outlook compared to the stable rating for the 3rd quarter.

Overall, the outlook for most country’s GDP’s is improved.  Presumably this is mostly due to some control over the virus, or growing means of dealing with it.  The US, Canada, and UK were upgraded for the 4th quarter to “stable” from “modestly declining”. 

It is interesting to note in the 3rd quarter the US economy surged something in the neighborhood of 33%, which would suggest the outlook of “slightly declining” badly missed the target, and this contradiction is not addressed in CNBC’s 12/2/20 article that reports these results.

Now that the Biden administration is about to take office, what are the likely actions we can expect?  This same CNBC Global CFO Council has commented on this as well. 

There will not be a divided government, as the GA election resulted in victory for both the Democrat Senate candidates.  While this means Democrats control all 3 elements of the government, the margins in both the House and Senate are so razor thin that easy major changes will be a difficult to implement.

One thing on the Biden agenda is raising the corporate tax from 21% to 28%.  Most of the CFO’s doubt this will happen, although the victory in GA makes this conclusion less forceful than when the survey was conducted right after the election.

The major conclusions from this group are these:

“Overall, CFOs are more likely to be of the view that President-elect Biden will be neutral for business rather than a positive or negative, according to the Q4 CNBC Global CFO Council Survey.

The immediate focus is more likely to be on pandemic stimulus spending and economic growth rather than major tax increases, though Biden remarked in a New York Times interview on Tuesday night that the wealthy and corporations need to pay their fair share.” Who knows how the next months will be.  We have the factors of huge debt increases, coronavirus vaccines and new outbreaks, plus the startup of a new administration that seems interested in implementing lots of changes.  Should be an interesting trip.

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