CFO Outlook: Steady Overall but Weaker for Small and Financially Constrained Firms

Corporate financial leaders expressed general optimism about the economic outlook, according to the third quarter CFO Survey. However, rising optimism among large companies was somewhat offset by declining optimism for small and financially constrained firms.

The survey, a collaboration of Duke University's Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta, was fielded from Aug. 17 to Sept. 4. It reflects the views of 517 financial executives.

"Overall, CFOs remain optimistic about the U.S. economy and their own company's prospects," said Sonya Ravindranath Waddell, vice president and economist with the Federal Reserve Bank of Richmond. "Where there are challenges, they are most pronounced for small or financially constrained firms. Rising optimism among large firms is accompanied by strong expectations for revenue and employment growth in 2026 and 2027. Not only did optimism decline among small firms, but 20 percent reported financial constraints that prevented them from covering costs or pursuing new business opportunities, compared to about 10 percent of large firms."

Relatedly, a smaller share of firms plan to make capital investments over the next six months compared to two quarters ago. Most firms that do not plan to invest in equipment, structures, or land report no need to expand capacity. However, a growing share reports unfavorable financing and increased liquidity needs.

The theme of financial constraints is also apparent in the list of CFOs' most pressing concerns. Twenty percent of financial decision-makers report that the current level of interest rates and potential for future rate hikes are top of mind. In addition, respondents are concerned about inflation, demand, and labor quality and availability. Non-labor costs, trade/tariffs, and uncertainty are also high on the CFOs' list of top concerns, though the share of firms concerned about non-labor costs declined notably from last quarter.

Nonetheless, overall expectations for demand and hiring remain solid, on par with last quarter. About 90 percent of companies expect demand over the next year to be about the same or stronger than last year. Likewise, most firms continue to hire replacements and fill new positions -- only 12 percent report not filling open positions or laying off workers. Among this 12 percent, over half cite financial constraints as cause for shrinking their workforce.

The CFO Survey is issued by Duke University’s Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta. The latest survey, as well as historical data, can be found at www.cfosurvey.org. Sign up to receive email notifications when new results are posted.

As part of our nation’s central bank, the Richmond Fed is one of 12 regional Reserve Banks working together with the Board of Governors to support a healthy economy and deliver on our mission to foster economic stability and strength. We connect with community and business leaders across the Fifth Federal Reserve District — including the Carolinas, District of Columbia, Maryland, Virginia, and most of West Virginia — to monitor economic conditions, address issues facing our communities, and share this information with monetary and financial policymakers. We also work with banks to ensure they are operating safely and soundly, supply financial institutions with currency that’s fit for distribution, and provide a safe and efficient way to transfer funds through our nation’s payments system.

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