Corporate Optimism Dampens on 2019 Economic and Business Growth
On Mar 15, 2019
In 2018, the vast majority of organizations reported being highly optimistic about the overall health of the economy as well as the fiscal health of their individual companies in the first Treasury Perspectives Survey. This year, optimism has waned as rising interest rates, gridlock in Washington, D.C., and increased regulatory oversight have all negatively impacted practitioners’ viewpoints, finds a new survey released today by Strategic Treasurer and TD Bank, America’s Most Convenient Bank®. The survey polled treasury and finance professionals on their views regarding the economy, technology, industry innovation and regulation to better understand top challenges and opportunities in the marketplace.
Among the top findings of the 2019 Treasury Perspectives Survey:
North American Challenges Center on Monetary and Regulatory Policy: When asked to select their top worries about doing business in North America, corporate respondents selected rising interest rates as their primary concern (56 percent), followed by gridlock in D.C. (38 percent) and an increasingly complex regulatory environment (34 percent). Fears of escalating trade conflict and a near-term recession rounded out the top 5 concerns.
Companies’ Optimism Declined: Ten percent fewer organizations expect the GDP of their headquarter country to increase in 2019 than they did in 2018. In addition, 7 percent fewer businesses reported optimism in their organization’s outlook than last year. These year-over-year swings show that organizations are increasingly wary of an economic slowdown following years of low rates and high growth.
Tax Reform has Limited Impact: Although 42 percent of firms in the 2018 Treasury Perspectives Survey expected U.S. tax reform to provide a significant benefit, the reality has been much different. In fact, nearly half (44 percent) of the 2019 survey respondents stated tax reform has had no significant impact on their business. Only 15 percent of the 2019 respondents increased total income, 12 percent improved financial performance and 10 percent brought funds back to the U.S.
Trade Conflict Makes Ripples, not Waves: Over the past year and especially within the last five to six months, there has been significant media coverage about trade conflict (particularly with China) and its potential impact on the U.S. economy. While the future of trade agreements still remains unclear, the majority of organizations (65 percent) stated that trade conflict has not had any significant impact on their business thus far. In total, only 18 percent have found it more expensive to conduct business in the past 12 months; 16 percent have paid higher prices on goods; and 10 percent increased the price of their own goods.
Regulatory Pressure is High and Expected to Climb: Since 2008, the level of regulatory oversight levied against corporates and banks has increased dramatically, both in the United States and abroad. As a result of this heightened regulatory environment, 51 percent of companies view current levels of regulatory oversight as higher than historical norms, while 2 percent see current levels as lower. Fifty percent of survey respondents also expect continued increases to the scope and reach of regulations over the next one to two years, while 7 percent expect a decrease.
Although their overall 2019 outlook is less positive than in 2018, it is worth noting that businesses stated that they still plan to invest in their operations. When asked about spending priorities over the next two years, 44 percent of respondents with revenues of more than $1 billion said they would undertake a major acquisition, 47 percent will invest in financial technology upgrades and 29 percent plan to launch a major new product or service. Smaller businesses (revenues less than $1 billion) are hesitant to outlay cash, and are four times less likely to spend in any category during the same time period.
The 2019 Treasury Perspectives Survey was sponsored by TD Bank and conducted by Strategic Treasurer. A copy of the complete survey data and an infographic are available here. There were approximately 340 respondents, consisting primarily of treasury professionals and corporate bankers from North America and Europe.