Most American CFOs expect a recession by the 2020 election

us usa flag work workerA worker cleans a stage to prepare for a celebration for Democratic Governor Andrew Cuomo once the results of the U.S. gubernatorial race are official in New York, November 4, 2014. REUTERS/Lucas Jackson

  • Duke University's CFO global business survey, has signaled that business optimism is at its lowest level in three years and that a recession within the next year could be on the horizon.
  • The survey, released on Wednesday, showing that pessimism has been rising, with 55% of CFOs being more pessimistic in the last quarter.
  • "Optimism is low in all regions of the world, which exacerbates any slowdown occurring in the US," said John Graham, a finance professor at Duke University's Fuqua School of Business.
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Duke University released its report on business optimism for the third quarter of 2019, and the results make for gloomy reading.

CFO Global Business Outlook survey found that business optimism is at its lowest level in three years and a recession before the 2020 election looks likely.

The survey has been going for 94 consecutive quarters and is a good barometer of the overall health of the economy as it gives an insight into what corporate financial planners are thinking. Duke boasts that it has historically been an accurate indicator of hiring and GDP growth, which both fell this quarter.

The survey said that pessimism was rising, as 55% of CFOs had become more pessimistic than in Q2 of 2019, while only 12% were still optimistic.

"Business optimism has not been this low since September 2016, a time when the unemployment rate was 5%," said John Graham, a finance professor at Duke University's Fuqua School of Business and director of the survey. "Optimism is low in all regions of the world, which exacerbates any slowdown occurring in the US," Graham added.

More worryingly, 53% of American CFOs believed that there would be a recession by the 2020 election and two-thirds see one coming by the end of 2020.

"The CFOs' views are consistent with other important indicators, such as the inversion of the yield curve," said Campbell Harvey, a founding director of the survey and Fuqua finance professor.

"Executives don't want to be caught unprepared for the next recession, like they were in the global financial crisis," he added.

Duke said that economic uncertainty was to blame, saying that these concerns were similar worldwide.

"Business spending is often weak in the face of economic uncertainty, which is what the survey finds in the US, with a less than 1% increase in capital spending expected over the next 12 months," the survey said.

"This is the lowest growth since September 2016, and the second-lowest growth since December 2009," it added.

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