CFOs Modestly Downgrade Economic Growth Expectations

June 27, 2023


Financial decision-makers lowered their expectations for U.S. economic growth in the next year, with almost 40 percent of small firms expecting that tighter financing will curtail business spending.

This is according to the second quarter results of The CFO Survey, a collaboration among Duke University’s Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta that was fielded from May 24 to June 9.

Growth expectations for gross domestic product for the next year were downgraded to an average of 1.0 percent from 1.4 percent last quarter, alongside an increase in the probability that respondents assigned to economic contraction. 

When asked to rate optimism about the overall U.S. economy on a scale from 0 to 100, the average rating from CFOs was 54.8, similar to the low level of optimism in the first quarter of the year. However, optimism was higher for the participants who responded after the debt ceiling resolution passed Congress: the average optimism rating was 57.4 among those who responded after the resolution passed Congress and 51.5 among those who responded before the resolution. Optimism among respondents about the financial prospects of their own firms also improved following the resolution on the debt ceiling.

“Financial leaders of firms became decidedly more optimistic about the U.S. economy and their own prospects without the fear that Congress would not come to agreement on the debt ceiling,” said Richmond Fed economist Sonya Ravindranath Waddell. “However, the debt ceiling deal did not change expectations of financial decision-makers for slower GDP growth in the next year. Small firms also seem to be experiencing a much more challenging environment with respect to revenue growth and financing than large firms.”

For all firms, the CFO Survey results suggest that price-growth expectations continued to moderate, as did median employment expectations. Concerns about inflation and labor availability also abated somewhat in the second quarter.

Small Firms’ vs. Large Firms’ Outlook

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More than 30 percent of small firms (those with fewer than 500 employees) reported that access to or the cost of financing has constrained investment or spending plans, compared with about 20 percent of large firms.

  • Looking forward, almost 40 percent of small firms responded that they expect lower investments and spending in the remainder of the year due to financing conditions, versus about a quarter of large firms.
  • Small and large firms reported that if access to or the cost of financing constrained spending, it would primarily hinder the pursuit of new business opportunities.
  • Small firms were more likely than large firms to report that financing conditions would make it difficult to replace or repair capital assets and refinance debt.
  • Small firms also had lower expectations than large firms for revenue growth in 2023.

The CFO Survey is issued by Duke University’s Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta. The latest survey, as well as historical data and commentary, can be found at Sign up to receive email notifications when new results are posted.

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