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CFO Insights — Economic cycles: What should CFOs prepare for now?

Published on: May 02, 2019

The economic recovery’s forthcoming 10th birthday should be a cause for celebration, as it will then cross the threshold toward becoming the longest expansion in U.S. history. But, like people, expansions can become more fragile over time.

For now, however, most economic indicators look robust: the economy grew at a stronger-than-expected rate of 3.2 percent in this year’s first quarter, the unemployment rate has only risen slightly since September 2018, when it plunged to a 49-year low, and the S&P 500 Index recently surged to an all-time high.

Yet what appears to be a bright sky looks to many CFOs like an opportunity for dark clouds to move in. In Deloitte’s North American CFO Signals™ survey for the first quarter of 2019, the vast majority of respondents said they expected either an economic slowdown (74 percent) or a recession (15 percent) by the end of 2020. The survey drew responses from 158 CFOs, representing many of North America’s largest and most influential organizations.

Their pessimism isn’t rooted in a vague hunch that the expansion is living on borrowed time. Those CFOs expecting a downturn were most likely to cite three main factors: U.S. trade policy, slowing growth in China and Europe, and the length of business and credit cycles.

This issue looks at which looming dangers have the combined potential to upend the economy in 2020, what CFOs should consider doing now to prepare their companies, and how a weaker economy requires finance leaders to become stronger decision makers.

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