Data & Results – Q3 2023
CFOs: Interest Rates Dampen 2023 Spending; Outlook For 2024 Brighter
Financial decision-makers ranked monetary policy as their top business concern, as higher interest rates have curtailed spending at approximately 40 percent of companies. The CFO outlook is brighter for 2024, however, with higher revenues and hiring expected next year, along with smaller increases in prices and input costs.
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CFO Optimism
When asked between August 21 and September 8 to rate optimism about the overall U.S. economy on a scale from 0 to 100, the average rating from CFOs was 56.2, up slightly from the second quarter of the year. Optimism among respondents about the financial prospects of their own firms also edged higher.
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CFOs’ Most Pressing Concerns
For the past several quarters, CFOs ranked difficulty hiring and retaining workers as their top business concern. This quarter, concerns about monetary policy jumped to the top, followed by labor quality and availability, inflation, and weak demand.
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CFOs’ Expectations for Their Firms’ Performance
CFOs’ expectations for their firms’ performance reflect a brighter outlook for 2024.
- Respondents expect employment growth to increase to nearly 4 percent in 2024, up from about 1 percent this year.
- Price and unit cost growth are both expected to temper in 2024, including the wage bill.
- Revenues are expected to rebound from an average of 3 percent growth in 2023 to more than 6 percent in 2024.
CFOs' Growth Expectations for Their Own Firms, by Response Quarter Q3 2023 Q2 2023 Mean (and Median) Expected Year-Over-Year Percentage Change for Calendar Years 2023 2024 2023 2024 Revenue 3.0%
(5.0%)6.5%
(5.0%)2.9%
(5.0%)6.7%
(5.0%)Price 5.9%
(5.0%)4.3%
(3.5%)4.6%
(3.8%)5.0%
(3.0%)Unit Cost 6.8%
(4.5%)5.0%
(4.0%)6.8%
(5.0%)5.7%
(3.0%)Employment (full-time) 1.1%
(0.0%)3.9%
(2.2%)6.1%
(2.5%)2.7%
(1.5%)Wage Bill 5.9%
(4.5%)5.4%
(4.0%)6.5%
(5.0%)5.9%
(4.0%)Note: Q3 2023 data in the table reflect results for 250 to 317 U.S. firms responding to the Q3 2023 survey (August 21 – September 8, 2023). Results from the Q2 2023 survey (May 24 – June 9, 2023) are shown for comparison (for 295 to 326 firms). Revenue, Price, and Unit Cost are weighted by sales revenue. Employment and Wage Bill are weighted by employment. These data are also winsorized at 2.5% and 97.5% to remove the potential influence of extreme values. -
CFOs’ Expectations for the Aggregate Economy
Growth expectations for gross domestic product for the next year were upgraded to an average of 1.3 percent from 1.0 percent last quarter, alongside a decrease in the probability that respondents assigned to economic contraction.
Expectations for Real GDP Growth Over Next Four Quarters, by Response Quarter Q3 2023 Q2 2023 Weighted Mean 1.3% 1.0% Weighted Median 1.4% 0.8% Probability of Negative Growth
(mean share of probability on bins below zero)18.9% 24.5% Note: Q3 2023 data in the table reflect results for 266 U.S. firms responding to the Q3 2023 survey (August 21 – September 8, 2023) and that indicate they are familiar with Gross Domestic Product (GDP). Results from the Q2 2023 survey (May 24 – June 9, 2023) are shown for comparison (for 298 firms). Responses are weighted by sales revenue. Expectations for Stock Market Performance, by Response Quarter Q3 2023 Q2 2023 Expected Annual S&P 500 Returns Over Next 12 Months and Next 10 Years 12 Mos
(N=207)10 Yrs
(N=210)12 Mos
(N=216)10 Yrs
(N=225)Worst Case (a 1-in-10 chance the actual return will be less than): -4.7% 3.2% -5.8% 3.0% Most Likely Case 4.9% 8.7% 4.2% 8.5% Best Case (a 1-in-10 chance the actual return will be greater than): 10.6% 13.0% 9.9% 13.1% Note: The table shows responses from firms that indicated they closely follow the stock market. Results from the Q2 2023 survey (May 24 – June 9, 2023) are shown for comparison. Responses are unweighted and winsorized at 2.5% and 97.5% to remove the potential influence of extreme values. Please see The CFO Survey Methodology for further information. Source: Duke University, FRB Richmond and FRB Atlanta, The CFO Survey – Q3 2023 (August 21 – September 8, 2023) -
Semiannual Questions on Investment
The third quarter CFO Survey included a semiannual investment module to ask participants about their recent structures and equipment investment decisions. The share of firms planning investments over the next six months edged higher compared to the first quarter of the year.
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Special Questions on Effects of Interest Rates and Other Factors on Spending
The third quarter survey asked CFOs whether the current level of interest rates and other factors were causing them to pull back on capital and non-capital spending plans. About 40 percent of CFOs said that the current level of interest rates has caused their companies to pull back on spending. The share of firms curtailing spending would grow closer to half if rates were to remain at their current level for another year. If rates were to increase another percentage point, half of the companies would dampen spending. Aside from interest rates, the top factors restraining spending were economic uncertainty, weaker demand, and hiring difficulties. For additional discussion of these results, visit our Research & Commentary section.
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