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Deloitte Survey: Usual First Quarter Bounce Fails to Materialize as Forecasts Soften

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Deloitte Survey: Usual First Quarter Bounce Fails to Materialize as Forecasts Soften

Expected growth in earnings, sales and capital spending all lower than year ago.

According to global professional firm Deloitte's first quarter CFO Signals™ survey, large company chief financial officers are less optimistic regarding the growth prospects of their organizations in 2014 than they have been at the start of each of the previous three years. 

Moreover, year-over-year earnings projections by CFOs hit an all-time survey low of 7.9%, compared to 12.1% one year ago. Despite their tentativeness, however, most CFOs continue to indicate a bias toward growth over reducing costs and are still focused on pursuing opportunities rather than limiting risk.

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This is in stark contrast to middle market executives, whose optimism has been on the rise.

In line with the declining optimism, CFOs' expectations for other key metrics recorded their lowest levels for a first quarter since the survey began, despite the bounce historically enjoyed at the start of the year.

For the first quarter of 2014, 47% of CFOs expressed improved optimism while 20% expressed declining optimism – for a net optimism of +27 percentage points. This is down from the +33 recorded in the previous quarter and stands at the lowest for any first quarter since the survey began in 2010. By comparison, net optimism in the first quarter of 2013 was +32 percentage points.

In line with the declining optimism, CFOs' expectations for other key metrics recorded their lowest levels for a first quarter since the survey began, despite the bounce historically enjoyed at the start of the year. CFOs' year-over-year expectations for sales growth sit at 4.6% – a slight rebound from last quarter's survey low of 4.1%, but below the 5.4% recorded for the same quarter in 2013. Capital spending growth expectations fell from 7.8% in the first quarter of 2013 to 6.5% this quarter and remained little changed from last quarter. Expectations for domestic hiring improved marginally over Q1 2013, though the forecast of 1.0% growth is below last quarter's and remains below the survey's historical average of 1.6%.

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