CFOs remain cautious about the economic picture. Globally, 47% of CFOs polled consider that the global economy is modestly improving. The balance sees it as either stable (25%) or modestly declining (28%).
There is more optimism in Asia, with a large majority seeing the global economy as modestly improving. US CFOs are also positive about their own domestic economy, with 71% seeing it as modestly improving. Overall, however, views on the economy are distinctly mixed.
This is also true when we look at some of the underlying drivers of economic health. Just 15% of CFOs consider consumer confidence to be strong, and just 24% and 25% respectively say the same about consumer demand and employment growth.
The leading risk they see to their business at present is economic: weakening consumer demand in the US and Europe, and softer growth in China.
But Patrick Winter, Asia-Pacific Deputy Area Managing Partner at EY, argues that fears of slowing growth in China are overplayed.
“Yes, the economy has slowed from its previous rate of expansion, but this still remains one of the biggest opportunities in the world from a growth perspective,” he says.
“The APAC region as a whole remains hugely appealing for companies worldwide and most will not consider short-term falls in growth rates to be a major concern.”
This mixed sentiment reflects a fairly divergent economic performance globally, even within regions.
“We see considerable diversity,” says Julie Teigland, Accounts Leader for EMEIA at EY.
“In some places, there are good reasons for optimism, such as the recent change of leadership in India, which heralds a new, business-friendly government. But, there are also countries that have not been so successful in carrying out the necessary economic reforms.”
Continued caution also reflects geopolitical risks, including developments in east Ukraine involving Russia and the associated tensions and sanctions rounds between Russia and the West, as well as the expansion of the Islamic State jihadist movement in the Middle East.
Indeed, CFOs globally see Russia and Eastern Europe as the region most susceptible to a slowdown over the next six months, and views are also negative on the Middle East. Concerns about deflation are also weighing on confidence in Europe.
Fears about the rapidly expanding West African Ebola outbreak are also impacting companies’ operations in Africa, another high-growth region. A number of companies have imposed travel restrictions to countries such as Nigeria, which was, until recently, one of the world’s fastest-growing economies.
Overall, Tom McGrath, Senior Vice Chair, Accounts for EY Americas, says that, although CFOs would usually factor in a certain amount of uncertainty, “there’s just more there today than perhaps there would be in a more normal environment.”