US Fed: CFO optimism rises on latest economic outlook

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CFOs are optimistic about the United States economy, according to a recent survey from the Federal Reserve Banks of Richmond and Atlanta, with top financial executives forecasting gross domestic product (GDP) growth of 1.7 percent in 2024. 

This is a big improvement from CFO attitudes tracked back in August, where GDP was only estimated to see a 1.3 percent uptick, according to the 400 CFOs surveyed in conjunction with Duke University’s Fuqua School of Business.

Despite increased optimism, there are still headwinds across the business landscape heading into 2024 that are giving financial leaders pause. For instance, while the Atlanta Fed indicated that they marked GDP growth at 2 percent in Q4 2023 as of January 2, it’s a downgrade from the 2.3 percent GDP growth forecast originally shared on December 23. 

While the final GDP gains for Q4 remain solid—albeit slighter than expected—there are a wealth of unique factors at play that will continue to drive uncertainty as 2024 unfolds. This includes geopolitics, with continued conflicts on the global stage potentially slowing supply chains.

Another major factor is Fed tightening, with interest rates from the central bank rising from near zero in March 2022 to a range between 5.25 percent and 5.5 percent today. This poses a challenge to businesses that plan to roll over their debt, as they face higher interest costs that could impede growth. 

There’s also the fact that inflation has continued to impact budgets, with 60 percent of respondents expecting prices to continue exceeding their pre-pandemic levels in 2024. As such, many of the respondents indicated that they will continue to tighten up on their spending in the new year in the hopes of recapturing revenue. 

Optimism in the face of uncertainty

“The probability that firms assigned to a decline in economic activity has fallen considerably since the beginning of” last year, Sonya Ravindranath Waddell, vice president at the Richmond Fed, said in the co-authored report with the Atlanta Fed and Duke.

The survey showed that CFOs on average expect to see 5 percent revenue growth this year, and even a 2.7 percent increase in payrolls—a jump from the 2.23 percent increase tracked in 2023.

To that end, a separate analysis of the Standard & Poors 500 predicts year-over-year earning growth to top 11.8 percent in 2024—a significant jump from the trailing 10-year 8.4 percent average annual growth rate. 

Does enterprise optimism translate to startup success?

While these findings are great news for established businesses, startups face much greater challenges in an uncertain economy than established businesses like those in the S&P 500. 

In that same vein, enterprises may have the capital reserves on hand to be conservative in their spending, while early-stage, pre-revenue companies don’t often have that luxury: They have to spend to build their innovation. 

Still, founders at any stage of the startup lifecycle should share in this optimism as they map out their strategies for 2024 and beyond. After all, a rising tide lifts all boats, and as the economy improves for the larger business community, there will be even more opportunities for innovative startups to take flight. 

Non-dilutive funding more critical than ever

The best route for startups to take in navigating a tumultuous funding landscape is to be sure they are diversifying their capital strategy, while also organizing their business with an eye toward innovation and R&D. 

By focusing on unique innovation, startups open the door for an array of funding options, including the potentially lucrative R&D tax credit that ultimately allows businesses to recoup a portion of their annual product development costs.

At Boast, we partner with thousands of startups and founders across North America to capture R&D tax credits and explore avenues for non-dilutive funding. Talk to an expert today to learn more about how we can help you maximize your claim and tap into the true value of R&D. 

To learn more about designing an R&D strategy that tees you up for long-term growth (while unlocking access to non-dilutive funding), download our latest ebook

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