The optimism among Chief Financial Officers (CFOs), has decreased in the first three months of this year, as economic and tariff uncertainty have cast a cloud over expectations.
Two Federal Reserve Banks and Duke University conducted a new study that found optimism has weakened since President Donald Trump was elected.
A more conservative outlook is a result of concerns over inflationary and trade policy pressures. This has an impact on corporate investment, spending and growth forecasts.
The survey found that the CFO’s average optimism score fell by 6.6 points from the pandemic high at the end last year, to 62.1 during the current quarter.
After Trump won the election, it soared six points to 60. The index previously plummeted as low as 50.5 in a time of high inflation.
Recent developments, notably the uncertainty around tariffs and policies of trade, has dampened excitement.
Key industries are affected by tariff concerns
Only the construction sector reported an increase of optimism from 66.6 up to 68.
CFOs’ sentiment dropped from 66.6 percent to 61.6 percent in the manufacturing sector, a segment Trump promised to help through import tariffs.
The business community is weighing the economic impact of new policies on trade, including disruptions to supply chains.
CFOs’ declining sentiment is in line with other economic indicators. According to the survey, executives expect slower growth rates and higher prices than they did at the end last year.
The survey was conducted by the Conference Board, and it showed that consumer confidence dropped to its lowest level in four years in March. This is because households are increasingly worried about both rising inflation and a possible recession.
Business confidence is dampened by policy uncertainty
Sonya Ravindranath Waddell is a vice-president and economist with the Federal Reserve Bank of Richmond. She highlighted the effect of concerns about trade policies on the outlook of corporates.
Waddell stated that “uncertainty about trade policies and uncertainty of the economy were on CFOs’ minds.”
Nearly one third of respondents voiced concerns over tariffs. These respondents also showed a significant reduction in optimism and reduced expectations for growth. They had lower revenue and employment expectations, as well as higher prices growth forecasts for 2025.
Businesses are increasingly cautious about potential economic downturns, despite their initial optimism after Trump’s victory.
The CFOs of companies are concerned with the impact that new trade tariffs, restrictions, and production costs could have on their supply chains and profitability.
The coming months are critical to business confidence, as trade tensions continue to escalate and inflationary pressures remain.
Interest rate policy, regulatory changes, and possible shifts in the trade talks will all have a major impact on economic expectations.
The declining optimism of CFOs could lead to a cautious corporate America in the coming months, with fewer investments and fewer hires.
Financial markets and policymakers are closely watching for any signs of a further slowdown in the economy as businesses deal with these uncertainty.
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