Optimism down, risk appetite up
The mood of optimism with which CFOs entered 2011 has weakened in the 2011 Q1 Deloitte CFO Survey. CFOs remain, on balance, positive, but our optimism indicator has dropped back to the lowest level in more than two years. Such caution fits with the news flow during the survey period, between 11th and 28th March which coincided with conflict in the Middle East, Japan’s earthquake and nuclear crisis and an elevated oil price. In the UK, inflation rose and the Budget focussed attention on impending tax rises and cuts in public spending. One of our special questions this quarter shows that, on average, CFOs expect the UK’s fiscal squeeze to reduce potential profits by 7.0% this year.
CFOs remain cautious about the recovery. On average, they attach a 29% probability to the chance of a double dip in the economy. The fact that controlling costs is a high priority for CFOs suggests they are alive to downside risks.
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