CFOs Look to the Future

A recent survey of the world’s chief financial officers gives a glimpse into their global economic outlook.
ABOUT A THIRD of the world’s chief financial officers believe their countries' economies will be in recession by the end of 2016, according to the CFO Global Business Outlook survey produced by the Fuqua School of Business at Duke University in Durham, North Carolina. According to respondents, there is a one-third chance that recession will hit countries such as the U.S., Mexico, France, Nigeria, Japan, and China by year’s end.

In addition, more than half of Brazilian, South African, Greek, Russian, and Portuguese financial executives polled believe their economies will enter or remain in recession by the end of the year. The survey, which ended in March, has been conducted quarterly for 20 years.

The survey also gathered opinions on controversial issues such as the minimum wage. Among U.S. firms that pay minimum wages to workers, 75 percent said they would reduce current or future employment if the minimum wage is raised to US$15 per hour. Respondents indicated they could accommodate the increase if the minimum wage is raised to $8.75 per hour, though they might replace more workers with machines; if the hourly rate rises to $10, 20 percent of affected firms said they would reduce employee benefits, and 43 percent said they would raise their prices.

“The CFO respondents show the math is not as simple as ‘increased minimum wages equal immediate layoffs,’” says Fuqua professor Campbell Harvey, a founding director of the survey. “It is more nuanced. CFOs reveal that increased minimum wages will lead to reduced hiring in the future and reduced benefits for current and future employees. While you might not see an immediate impact, corporations will find ways in the future to compensate for increased costs imposed by new regulations.” The survey also covered topics such as business spending, interest rates, and the global economic outlook.

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