As everyone waits to see what Fed chair Jay Powell and his team to do next year, and traders make bets that they won’t cut the key rate at this coming July meeting, and instead just message that they gearing up for a cut at the September meeting. This is pretty much the consensus view.
Unless you talk to the Chief Financial Offiers who PNC Bank Chief Economist Gus Faucher and his team spoke with in their cool new survey of a few hundred of the nation’s CFO’s, from smaller businesses, to large corporations: nearly half of them see no rate cuts at all this year.
”We were just curious about what CFO’s were thinking about monetary policy,” Guy told me before our interview got underway.
”Given that the fed has talked about cutting rates the expectation is out there that the fed will cut rates later this year,” he said. “So we wanted to talk with Ceos and and see what they were saying about the rate, the outlook for interest rates, what they think the fed will do and what the impact will be on their business.”
Spoiler alert: Gus does not agree. He sees the Fed doing its first rate cut in September as inflation continues to gradually decelerate on the path to its 2% target, meaning that it will be letting policy become more restrictive if it allows the real fed funds rate to rise. In keeping with a cautious approach, it will not do its next cut until December, unless the economy suddenly starts weakening quickly, which is not what he is expecting.
With that in mind, take a look at the survey, “Inside the Minds of CFO’s.” Given that so many of them don’t expect rate cuts in 2024 it’s kind of mind blowing that 86% say a rate cut now would boost their financial performance.
Research Executive Summary
Methodology
A 15-minute, web-based survey was conducted between June 10, 2024 and June 21, 2024. By the field close date of June 21, 2024, 303 completed responses had been received.
The study included CFOs, ages 26+, employed full time as a CFO in any industry except market research, advertising/marketing/PR, media/publishing/broadcasting, non-profit/social action and / or politics lobbying, in a company headquartered in the US, with a turnover of $5 million or more.
Topline National Findings
Almost half of US CFOs don’t expect the Federal Reserve to cut interest rates this year, running counter to predictions by the market and Federal Reserve officials themselves.
Almost a third of the CFOs go a step further, predicting interest rates will actually rise this year, despite a slowdown in inflation, weakness in the job market and a slide in homebuying in recent months.
86% of CFOs say a rate cut would improve their company’s financial performance.
80% Public company CFOs say a rate cut would increase their share price.
CFOs who say that after a rate cut their company would increase:
Technology Spending 75%
Capital Expenditures 73%
Hiring 70%
Bank Borrowing 69%
Introducing New Products/Services 68%
Refinancing Debt 68%
R&D Spending 67%
Employee Compensation/Benefits 65%
Expansion to New Markets 65%
Since 2020, surveyed company’s investment in technology has changed…
Increased 26-50% 19%
Increased 1-25% 59%
No Change 21%
Decreased 1-25% 2%
Decreased 26-50% 0%
Over the past 12 months, surveyed CFOs have invested in the following technologies:
Cybersecurity/Fraud Protection 71%
Cloud Computing 65%
Automation 57%
Artificial Intelligence/Machine Learning 52%
Hardware and Infrastructure 45%
Enterprise Resource Plannings Systems (ERPs) 39%
Collaboration Tools/Sales Enablement 38%
Managed Mobility Services 30%
Surveyed CFOs expect their company’s office square footage will change in the next 12 months.
Increase 65%
No Change 33%
Decrease 3%
47% of companies with a loan or bond maturing in the next 12 months, CFOs say they will:
Refinance With Their Existing Bank 41%
Raise Capital from Private Equity,
Non-Bank Lenders, Private Investors etc. 27%
Refinance With a Different Bank 22%
Refinance in the Bond Market 6%
Pay off the Loan 5%
44% of Public company CFOs surveyed say it is extremely or very likely their companies will be taken private in the 12 months after a rate cut.
19% of Private company CFOs surveyed say it is extremely or very likely their companies will pursue an IPO in the 12 months after a rate cut.
CFOs share that the biggest challenges for American companies today revolve around employees (31%), change and uncertainty (25%) and issues surrounding technology (19%).
Augustine (Gus) Faucher is senior vice president and chief economist of The PNC Financial Services Group, serving as the principal spokesperson on all economic issues for PNC.
Prior to joining PNC as senior macroeconomist in December 2011, Faucher worked for 10 years at Moody’s Analytics (formerly Economy.com), where he was a director and senior economist. Previously, he worked for six years at the U.S. Treasury Department and taught at the University of Illinois at Urbana-Champaign. He was named senior vice president in March 2015, deputy chief economist in February 2016, and to his current role in April 2017.
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