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CFOs Remain Optimistic Despite Concerns About Cost Pressures, Labor Availability

Chief Financial Officers (CFOs) and other financial decision-makers of both large and small businesses continue to be optimistic about U.S. economic prospects for the second half of 2021, according to the Q2 results of The CFO Survey, a collaboration of Duke University’s Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta. However, when asked about their key concerns, labor availability and cost pressures rose to the top.


The widespread labor shortages are increasing costs and adding to inflationary pressures. Of equal concern, more than half of the 75 percent of firms that reported challenges finding workers also reported that the worker shortage reduced revenue—and this was even more pronounced for small businesses. Aggregated across the panel, labor shortages alone cost the economy 2.1 percent, or $738 billion, in lost revenue.


CFOs expect revenue and employment to rise notably through the rest of 2021,” said Sonya Ravindranath Waddell, vice president and economist at the Federal Reserve Bank of Richmond. “Nonetheless, well over a third of firms anticipated worker shortages to reduce revenue potential in the year. With so many firms unable to find the employees or inputs to meet the demand for their products and services, it is not surprising that respondents anticipated both cost and price increases.”


Approximately 80 percent of respondents reported larger than normal cost increases that are anticipated to last for many months. Much, though not all, of this increase is expected to translate into price increases The implication is that there could be increasing pressure on profit margins for both large and small companies across many industries.


In spite of the concerns, CFOs expressed growing optimism for their own firms, with average optimism at 74.9 on a scale of 0 to 100 – above the first quarter reading of 73.2. When asked to rate their optimism about the overall U.S. economy, the average rating was 69.0, an increase from the 67.7 reading in the first quarter.

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