Little Reason to Worry: CFOs Look More Optimistically to the Future

A wave of relief is sweeping through American executive suites: The uncertainty brought about by trade disputes in the first half of the year seems to be dissipating. However, the issue of price increases remains a concern. This is shown by the latest survey by the U.S. Federal Reserve among chief financial officers. The quarterly survey, conducted by the Federal Reserve Banks in Atlanta and Richmond, along with the Fuqua School of Business at Duke University, surveyed 525 companies. The result: CFO optimism increased, while concern over political uncertainties decreased in the third quarter. This correlates with the Trump administration's implementation of final tariffs on a variety of goods and countries. Although the restructuring of trade rules is not yet complete and important court decisions are pending, financial executives are assigning less importance to "uncertainty." At the beginning of the Trump administration, massive tariff proposals had kept the markets on edge. Investment and hiring plans were put on hold, while companies and households stocked up on import goods, distorting economic data. Tariffs remain the main concern for financial executives, followed by inflation and monetary policy, but their urgency has fallen from 40% to now 30%. This gives companies the opportunity to plan their futures more precisely. For import-dependent companies, this means preparing for price increases, which makes the Federal Reserve cautious about interest rate cuts until the impacts on inflation become clearer. This year, price increase expectations have slightly decreased, but for next year, they have risen, worrying some policymakers that the full effects of the tariffs on inflation will only become visible in the coming months. "Compared to last quarter, companies are less uncertain about tariffs and expect less extreme price increases this year," the survey analysts stated. While extreme impacts have not materialized so far, current forecasts could be misleading, as some companies report a cost increase of up to 30% on planned price hikes. As long as uncertainty over tariffs decreases, the challenge of import costs remains.