Dive Brief:
- U.S. finance leaders remained broadly optimistic about the economy in the third quarter, but smaller and financially constrained companies reported weaker outlooks and greater pressure on their finances, according to a new CFO Survey from the Federal Reserve Banks of Richmond and Atlanta and Duke University.
- Optimism rose among large companies, but declined among small and financially constrained firms. CFOs rated their optimism about the U.S. economy at an average 60.3 on a 100-point scale, holding relatively steady from the prior quarter, according to the report released Wednesday. The survey reflects responses from 517 financial executives between Aug. 17 and Sept. 4.
- “Overall, CFOs remain optimistic about the U.S. economy and their own company's prospects,” Sonya Ravindranath Waddell, vice president and economist with the Federal Reserve Bank of Richmond, said in a statement. “Where there are challenges, they are most pronounced for small or financially constrained firms.”
Dive Insight:
Overall, CFO optimism held steady as expectations for demand and hiring remained solid.
About 90% of firms expect demand over the next year to increase or remain about the same, while mean expectations for 2026 revenue growth rose to 7.7% from 6.5% in the second quarter. Expected full-time employment growth also increased to 4.7% from 3.6%.
CFOs' outlook for the broader economy also remained stable. Their average expectation for real GDP growth over the next four quarters edged up to 1.9% from 1.8%, while the probability they assigned to negative growth fell to 10.7% from 11.6%.
At the same time, financial constraints are weighing more heavily on smaller companies. About 20% of small companies reported financial constraints that prevented them from covering costs or pursuing new business opportunities, compared to about 10% of large firms, Waddell noted in her statement.
Twenty percent of financial decision-makers said the current level of interest rates and the potential for future rate hikes were top concerns. Inflation, labor quality and availability, trade and tariffs, and uncertainty were also major stress points.
The survey was conducted before the Federal Reserve’s decision last week to raise its benchmark interest rate by a quarter percentage point due to inflation concerns.
