The lack of certainty continues to curb spending plans of Chief Financial Officers (CFOs) of mid-market companies. Based on a survey conducted in July among 60 CFOs of American companies with annual revenues ranging from $100 million to $1 billion, 59% of firms with increased certainty levels have increased capital expenditures. In contrast, among companies where certainty levels have decreased, only 12% have increased their investments, creating a 47 percentage point difference in the share of those who are more actively investing. Only 5% of firms with growing certainty reduced capital expenditures, as opposed to half of the companies with declining certainty that cut them.
When uncertainty rises, 58% of CFOs state they will cut or delay capital expenditures, whereas only 7% would cut service expenses. Meanwhile, 57% of firms adjust capital expenditures within three months after a change in confidence level, and 90% within six months. More than half of CFOs require high certainty before deciding to expand. Meanwhile, 91% stated that even a slight or moderate decrease in certainty would prompt them to take a defensive stance. Companies already undergoing expansion tend to wait longer before adjusting investments, indicating a willingness to absorb short-term changes in conditions. For 27% of respondents, the primary source of uncertainty affecting investment decisions is demand, while 22% focus on interest rates and financing costs.
Despite this, among survey participants, 47% plan to increase capital expenditures in the next 12 months, while 42% intend to increase their workforce. Among companies with moderate uncertainty, 60% plan to invest more, while this number drops to 25% among those exposed to high uncertainty. For firms with low levels of uncertainty, 56% expect an increase in workforce. These data indicate that companies can continue to grow even with some uncertainty, provided that executives feel confident enough to make financial commitments.
Related articles
