DURHAM – Nearly half of U.S. CFOs believe that America’s economy will enter a recession by the end of 2019, and 83 percent believe that a recession will occur prior to the end of 2020, according to data gathered and analyzed by Duke University/CFO Global Business Outlook.

“For the past few years, it has been surprising that the U.S. economy has been chugging along,” said Dr. John Graham, a finance professor at Duke’s Fuqua School of Business and director of the CFO Global Business Outlook survey.  “The end is near for the near-decade-long burst of global economic growth.”

This survey is the 91st consecutive quarterly survey designed and gathered by CFO Global Business Outlook, and it concluded on December 7 with responses from more than 500 CFOs from across the world including 212 from the United States.

Outlook for 2019

For 2019, CFOs expect sub-3 percent growth for the U.S. economy and a slowdown of capital spending.  Both capital spending and employment growth are projected at approximately 3 percent, however, the forecasts are skewed to the downside, said Graham.

There is at least a one-in-ten chance that annual real growth will be a meager 0.6 percent, a worst-case scenario where CFOs would expect capital spending to fall by 1.3 percent and hiring to remain flat.

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“Their recession projections suggest CFOs believe most of this growth will occur early in the year,” Graham said.  “This means there is still time for the government to use the tools at their disposal to soften the fall.”

With regard to their own businesses, the CFOs continued to report difficulty in hiring and retaining qualified employees, with 47 percent of CFOs noting that this is among the top four concerns for their business.  Additional concerns include the cost of employee benefits, government policies, and economic uncertainty.

Optimism declines

Consistent with predictions of recession, the Optimism Index for the U.S. Economy slipped to 66 this quarter, compared to an all-time high of 71 last quarter; CFO optimism about their own firms’ financial prospects dropped two points to 69 on a 100-point scale. Both indices were at all-time highs earlier this year.

According to CFO Global Business Outlook, the survey’s CFO Optimism Index has historically been an accurate predictor of future hiring and overall GDP growth.

“CFOs are getting ready for a recession in the next 18 months,” said Campbell Harvey, a founding director of the survey.  “All of the ingredients are in place: a waning expansion that began in June 2009 – almost a decade ago – heightened market volatility, the impact of growth-reducing protectionism, and the ominous flattening of the yield curve which has predicted recessions accurately over the past 50 years.”

According to the survey results, optimism has also declined in Europe by 11 total points in the last two quarters and in Asia, dropping eight points this quarter.  Optimism did rebound in Africa, though the average ranking is just 51 on the Optimism Index tracked by the survey.

“As individuals, we are not in a recession yet, and CFOs aren’t predicting a recession until next year,” said Graham, “But the time to take caution is now.”

A counter trend: moderately strong hiring

Though CFOs are notably concerned about an oncoming recession, the survey found that businesses are still planning to do a fair amount of hiring.

“We’re still playing a bit of catch up,” said Graham, “As companies haven’t been able to hire as many employees as they would like, or haven’t been able to hire employees that have specialized skills.”

These moderately strong hiring plans, said Graham, may act as a counter-trend against the onset of a recession, as more highly-trained, in-demand employees spending on consumer goods in the economy may act as a buffer.

Nevertheless, the overall economic outlook has declined in the United States, said Graham, “and moreover the outlook is even worse in many other parts of the world, which will lead to softer demand for U.S. goods.”

The survey demonstrates that CFOs have become pessimistic in most regions of the world.  Ninety-seven percent of African CFOs believe their countries will enter a recession no later than year-end 2019, as do many CFOs in Canada (86 percent), Europe (67 percent), Asia (54 percent), and Latin America (42 percent), found the survey.