August, 28, 2020
Today the world’s leading chief financial officers have a more positive outlook for China’s economy than they do for the economy of the United States. The Q3 CNBC Global CFO Council Survey revealed on Friday. That is the first time in the survey’s history that this elite corps of executives were more upbeat on China.
In the latest survey, CFOs gave an average outlook of “Stable” for China’s GDP, while seeing the U.S. economy as “Modestly Declining.” Around the world, GDP outlook was generally improved from the second quarter survey, when no region was seen as stable. This quarter, along with China, the council upgraded the rest of Asia and the Eurozone from “Modestly Declining” to “Stable.” Latin America went from “Strongly Declining” to “Modestly Declining”. But the U.S. economy was seen as “modestly declining” for the second straight quarter.
China’s bounceback comes as the country deals with the double-whammy of the pandemic and heightened tensions with the United States over trade, technology and geopolitics. It has been spurred by ramped up government stimulus to combat the coronavirus-led downturn.
The International Monetary Fund has forecast China real GDP to expand 1.0% for the full year, the only major economy expected to report growth in 2020. In contrast, it forecasts that real GDP will be -8% in the U.S. during the same period.
The CNBC Global CFO Council represents some of the largest public and private companies in the world, collectively managing more than $5 trillion in market value across a wide variety of sectors.
What lies ahead for the U.S. market
CFOs also struck a cautious tone about the stock market. Despite a rapid recovery for stocks from the market’s bottoming out in April, the council is split on where the market is headed next. Statistics tell the story. According to the survey, 42.5% say the Dow Jones Industrial Average will fall back below 25,000 before it reaches 30,000 for the first time. Nearly one-third of executives (27.5%), think the record high will come before another downturn for the Dow.
The downbeat outlook for the U.S. economy and the markets reflects the continued state of uncertainty for large companies in the face of the Covid-19 pandemic. Twenty-five of the 40 CFOs who responded to this quarter’s survey called the pandemic the biggest external risk facing their companies, while 80% say the pandemic will have a negative or very negative impact on their company this year. Only one CFO said the pandemic will be positive for their company.
One way many firms will manage the negative impact is through layoffs. More than half of respondents say they expect their company’s net headcount to decrease over the next 12 months. Just about a quarter of CFOs said the same a year ago. And despite improving economic situations in Asia compared to other parts of the world, CFOs in the APAC region were much more likely to say they expect their headcounts to decrease compared to their U.S. peers.