Finance

European CFOs more optimistic about economic growth

September 12, 2013

CFOs can see the future with a degree of optimism. The optimism of the previous quarter continues. About half of the financial directors are more positive about the economic outlook than the previous quarter. Companies invest more; capital spending, technology spending and R&D spending should increase the next year. Domestic employment is expected to decrease.

This has transpired from the Global CFO Survey, the longest running worldwide study into economic views among top financial managers, conducted by Duke University and TIAS School for Business and Society and supported by universities in Japan, South Africa and Brazil.

Country optimism index

For the first time in years, more than half of the European CFOs are optimistic about the economy. About a third of US CFOs see the economy with confidence. In terms of the sentiments-index are US directors more optimistic than European CFOs. Europeans score 56 (on a scale of 1-100); more than last quarter. The US score reduced to 58. Latin American CFOs are the most optimistic in the world (61, down from 66 last quarter and 69 two quarter ago). Almost all financial directors are still concerned about weak consumer demand, price pressure and global economic instability.

Of the European financial executives is 47 percent optimistic about the business forecasts for next year. The European business optimism index rebounded to 56 (up from 53). Spending in capital, technology and R&D is expected to increase the next year (respectively with 3.1 % , 5.1% and 4.5%).

European employment under pressure

Companies are clearly still searching for a new employment model. More than 60 percent of European CFOs indicates that a shift has occurred in the execution of work. For example, a third of them said that - unlike their permanent employees - temporary work for contractors has increased. Another 18% of respondents indicated that external advisors and consultants have taken over the work of permanent employees. Drivers for these shifts are economic uncertainty, weak consumer demand and the fact that the hourly rate of permanent employees is relatively higher than that of temporary or remote workers .

The expected increase in productivity of 2.7 percent is not translated into an improvement in employment. For the coming year the European CFOs expect a decrease of the permanent and temporary contracts (down 1.8 and 2.4 percent respectively). These workers seem to be partly replaced by outsourced employees.

Kees Koedijk, dean and director of TIAS: “It looks that the declining demand for labor is not temporary, but the new reality. Companies go back to their core business and outsource their other activities. With the crisis in mind companies are thinking about a new employer model and a flexible shell. Automation also reduces demand for employment.”

These are some of the findings from the latest TIAS/Duke University Global CFO Survey, which concluded September 6th. The CFO survey has been conducted for 70 consecutive quarters and spans the globe, making it the world’s longest running and most comprehensive research on senior finance executives.

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Quaterly Report Q3 2013, CFO Survey (2013)

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