- Only 5% of chief financial officers at North America-based major corporations plan to decrease capital spending in 2021, while over 40% plan to invest more, according to the Q4 2020 CNBC Global CFO Council Survey.
- A significant percentage of CFOs say their firms will be in hiring mode next year, but one-third of U.S.-based firms indicated that more layoffs are coming.
- More financial chiefs are planning 2021 strategy around coronavirus vaccine optimism rather than the current case surge, but the Covid-19 second wave is weighing on CFOs in the U.S. and Europe.
Chief financial officers at large multinational corporations are cautiously optimistic about 2021 strategic investment and hiring. Optimism about a coronavirus vaccine is outweighing concerns about the current Covid-19 case surges in the U.S. and Europe, according to the results of the Q4 2020 CNBC Global CFO Council Survey.
In the area of corporate spending, only 5% of U.S. CFOs said capital spending will decrease over the next 12 months, while an equal (47%) of respondents said spending will either increase or remain the same. The North America-based CFOs indicated the lowest level of planned spending pullbacks, with CFOs from Europe (9%) and Asia-Pacific (15%) more likely to say investment will be reduced in 2021.
There will be more pain in the U.S. labor market, with 32% of U.S. CFOs saying headcount will decrease, but a higher percentage of domestic CFOs (42%) expect headcount will increase in the next year, according to the survey.
"That tells me that 30% of CFOs don't see a vaccine as a panacea for the U.S.," said Diane Swonk, chief economist at audit, tax and advisory firm Grant Thornton. "We should see a burst in activity once people free safe to congregate again. We won't see that burst if they don't and that is heavily dependent on a vaccine and treatments that reduce the consequences of Covid."
U.S.-based CFOs indicated the highest levels of hiring and layoffs compared to peers around the world. In Europe, CFOs were twice as likely to say headcount would increase, at 36%, versus 18% who expect workforce reductions. Asia is the only region in which CFOs say layoffs (46%) will be more widespread than job additions (31%).
Swonk said automation of jobs out of the pandemic is likely a factor in the headcount reductions.
The CNBC Global CFO Council represents some of the largest public and private companies in the world, collectively managing more than $5 trillion in market value across a wide variety of sectors. The Q4 survey was conducted from Nov. 13-Nov. 29 among 43 of the Council members.
Covid-19 does remain the biggest external risk factor cited by U.S.-based CFOs (68%), but more U.S.-based CFOs are planning for 2021 based on the promise of a vaccine (58%) than around the current surge in cases (32%).
"Masks, testing and tracing work. Health policy and economic policy are complementary not competitive," Swonk said.
In Asia, where the virus is more under control than in the U.S. and Europe, corporate planning around the promise of a vaccine is above 90%. The U.K. became the first country to approve the Pfizer-BioNTech vaccine on Wednesday, with a decision in the U.S. expected some time after a Dec. 10 FDA meeting.
While China continues to outpace the U.S. in economic growth out of the pandemic — and a recent surge across the U.S. in Covid-19 cases has led to U.S. GDP downgrades for Q1 2021 — the CNBC survey finds CFOs describing the U.S. economy as "stable" after two quarters of "declining" conditions.
The election results have influenced the CFO view into 2021, including in the area of corporate tax hikes promised by President-elect Joe Biden — CFOs do not think a corporate tax rate increase to 28% is likely. Overall, the largest group of CFOs taking the post-election survey (36%) have a neutral outlook on the Biden administration's impact on their companies over the next four years. CFOs expressing the belief that Biden's first term will be a clear positive or negative for their business were split evenly, at 32% for each response.