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CFOs remain optimistic despite crises and risks: upturn in sight

The Deloitte CFO Survey for spring 2024 shows a cautious recovery in the German economy, with domestic market sectors benefiting while export-oriented sectors continue to suffer from uncertainties.

  • After the 2023 recession and a weak start to the year, German CFOs see a cautious economic recovery according to the Deloitte CFO Survey

  • Sectors very mixed: Domestic market-oriented industries such as retail and real estate are benefiting from falling inflation, with business prospects rising sharply here

  • Export-oriented industries such as automotive continue to show negative values and are suffering particularly from geopolitical uncertainty; only the chemical industry is surprisingly optimistic

Last year’s downturn has been halted, with the first analyses from the new Deloitte CFO Survey from March/April 2024 showing a significant improvement in business prospects. The index value, i.e. the difference between positive and negative assessments, rose from -30% to +9%. This means that almost a third of the CFOs surveyed are more positive about the business outlook than three months previously (see Fig. 1 below).

Business prospects are recovering very differently

However, there are major differences between the sectors: trade (index: +30) and real estate (index: +27) in particular are benefiting from the recent recovery after a long dry spell; falling inflation and expected interest rate cuts are boosting optimism here.

Export-oriented sectors are less optimistic; the manufacturing industry and the automotive industry in particular (index: -62) are suffering much more from geopolitical risks than they are benefiting from falling inflation. However, CFOs in the chemical industry are surprisingly positive – after the sector was one of the worst performers in terms of optimism in the last few reports, it has recently bucked the trend in the manufacturing industry with a significantly improved outlook (index: +31).

“Even though the economic situation has brightened up compared to the autumn, there is still no sense of optimism,” says Dr. Alexander Börsch, Chief Economist at Deloitte. “The economic downturn seems to have come to a halt, but a dynamic upturn is not yet in sight. Companies are remaining cautious in their planning for the time being.”

Persistent uncertainty leads to cautious corporate strategies

Despite generally rising sales expectations (index: +27%): Companies remain defensive when it comes to personnel and investment planning, which is reflected in the stagnating indices for investment (-1%) and recruitment (-4%). The outlook is more positive in the services sector, where increases in employment (+14%) and investments (+11%) are planned. New employees are particularly sought after in the technology and logistics sectors, while the strategy in the automotive sector is much more defensive in line with the poor business outlook: here, more than half of the CFOs surveyed plan to invest less and 77% plan to reduce the number of employees.

The size of the respective company also influences the outlook and planning. Large companies (turnover > EUR 1 billion) are more expansive in the current CFO Survey and expect a strong increase in investments (+10%) and employment (+13%). SMEs are more defensive when it comes to investments.

Geopolitical risks and inflation remain challenging, cyber risks on the rise

Hauptgeschäftsrisiken sehen die Finanzchefs vor allem in einer schwächeren Inlandsnachfrage, beim Fachkräftemangel, bei steigenden Lohnkosten und geopolitischen Risiken. An Bedeutung haben im Vergleich zum letzten Herbst geopolitische und Cyber-Risiken gewonnen. Insbesondere für Großunternehmen und Exportindustrien bleiben die geopolitischen Risiken auch weiterhin der bedeutendste Faktor. Bei der Inflation erwarten die Finanzchefs eine durchschnittliche Preissteigerung von 3,1 Prozent in den nächsten 12 Monaten und damit deutlich mehr als die meisten volkswirtschaftlichen Prognosen. Somit bleibt die Inflation weiterhin ein wichtiges Thema für die Unternehmen.

The CFOs see the main business risks primarily in weaker domestic demand, a shortage of skilled workers, rising wage costs and geopolitical risks. Geopolitical and cyber risks have gained in importance compared to last fall. Geopolitical risks remain the most significant factor for large companies and export industries in particular. In terms of inflation, CFOs expect an average price increase of 3.1% over the next 12 months, which is significantly higher than most economic forecasts. Inflation therefore remains an important issue for companies.

“The economic situation is stabilizing,” says Börsch. “Normally, falling inflation and the likely interest rate cuts in Europe and the USA could provide additional momentum in this situation. However, this is subject to the proviso that geopolitical conflicts continue or even escalate. The further recovery process in Germany therefore remains highly dependent on geopolitical developments.”

Development of the business outlook (Fig 1 from the CFO Survey)

Question: How do you assess the current business outlook of your company compared to the outlook three months ago?

Fig. 1: Assessment of business prospects

Source: Press release from 22.04.2024

The study is only available in German.

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