CFO Survey: Global Recession Predicted

Professor John Graham (of Duke Fuqua School of Business) directs the world's most comprehensive research on senior finance executives. Nearly half of chief financial officers in the United States believe the nation’s economy will enter a recession in 2020, according to the Duke University/CFO Global Business Outlook. CFOs in other parts of the world predict an even higher probability of recession. The CFO survey has been conducted for 93 consecutive quarters and spans the globe, making it the world's longest-running and most comprehensive research on senior finance executives. The survey ended June 6. Results are for the U.S. unless stated otherwise.

Nearly half (48.1 percent) of U.S. CFOs believe that the U.S. will be in recession by the second quarter of 2020, and 69 percent believe that a recession will have begun by the end of next year.

“The numbers may fluctuate slightly, but this is the third consecutive quarter that U.S. CFOs have predicted a 2020 recession,” said John Graham, a finance professor at Duke’s Fuqua School of Business and director of the survey.

Eighty-five percent of African CFOs believe their countries will be in recession by the second quarter of 2020, as do the majority of CFOs in Europe (63 percent), Asia (57 percent), and Latin America (52 percent).

“For the first time in a decade, no region of the world appears to be on solid enough economic footing to be the engine that pulls the global economy upward. Trade wars and broad economic uncertainty are hurting the economic outlook,” said Graham.

The U.S. CFO Optimism Index, which historically has been an accurate predictor of hiring and GDP growth, is sending mixed signals this quarter. Pessimists outnumber optimists by a two-to-one margin in terms of their optimism about the overall U.S. economy. At the same time, those growing more optimistic about their own firm’s prospects outnumber those growing more pessimistic. Both indices were strongly optimistic as recently as September 2018. “The reduced optimism about the overall U.S. economy likely reflects continued uncertainty about trade policy and weaker global economic growth,” said Graham. “The overall Optimism Index is 65.7 this quarter, on a scale from 0 to 100, down from 70 in September 2018.” Another factor is the ominous inversion of the yield curve, which means short-term interest rates are higher than long-term rates for at least a full quarter. Inverted yield curves have predicted the last seven recessions. “All of this bodes poorly for economic growth,” said Campbell Harvey (another Fuqua finance professor).

Reference:

CFO Survey: Global Recession Predicted; Strong Support for U.S. Immigration Reform, Duke Fuqua School of Business, June 11, 2019