American CFOs fear a recession by the third quarter of next year, according tothe latest Duke CFO Global Business Outlook Survey, released Wednesday.
The survey generated responses from more than 1,500 chief financial officers, including 469 from North America, and showed that 67% of those surveyed predicted the U.S. economy would be in recession by the third quarter of 2020, and 84% believe a recession will have begun by the first quarter of 2021. Thirty-eight percent of respondents predicted a recession by the first quarter of next year.
John Graham, finance professor the Fuqua School of Business at Duke University and director of the survey, told MarketWatch that while CFOs are not as pessimistic as they were three months ago, it is unusual in the history of the survey for such a large share of respondents to predict a recession just 16 months from now.
”The recession predictions are closer than usual, with a greater magnitude” of respondents indicating recession fears, Graham said.
Last quarter’s survey showed a greater degree of pessimism, with nearly half of respondents predicting a recession by the end of 2019. Graham speculates that these figures were heavily influenced by the fourth quarter’s stock-market swoon, when the S&P 500 SPX, +0.19% was in the midst of a nearly 20% freefall from its September highs.
This time around, the survey shows executives as relatively bullish for the current calendar year, with the median respondent predicting that their firm will increase capital spending by 5% over the next 12 months, while foreseeing employment at their company rising 2% and wages rising 3%.
Nevertheless, Graham said there is a clear trend of deteriorating optimism among American CFOs, as the share of executives surveyed who have grown more optimistic about the U.S. economy has fallen from 53.3% a year ago to 24.1% today.
Meanwhile, Graham said, growing investment and employment figures are not inconsistent with fears of a recession in 16 months’ time, as investment and employment growth are lagging indicators of economic growth that typically continue to rise until the economy begins to contract.