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Duke CFO Survey: Cost Pressures Mount Amid Widespread Supply Disruption and Labor Shortages

Three-fourths of U.S. Chief Financial Officers (CFOs) express difficulty hiring, leading them to increase wages, according to The CFO Survey for Q3 2021, a collaboration of Duke University’s Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta. Most CFOs also indicate in the survey that their firms are experiencing supply chain disruptions that are expected to last well into 2022.

When asked whether they are currently experiencing disruptions in their supply chains, three-quarters of CFOs report disruptions, including production delays, shipping delays, reduced availability of materials, and increased materials prices. Large firms are more likely than small firms to take action to adjust their supply chains, such as holding more inventory, diversifying or reconfiguring supply chains, moving production closer to the U.S., or changing shipping logistics. Small firms note less “room to maneuver” and are more likely to report waiting for supply chain issues to resolve themselves.

Only about 10 percent of survey respondents anticipate these supply chain difficulties will resolve by the end of this year. Most CFOs anticipate these issues will not resolve until the second half of 2022 or later.

The actions that these companies are taking to manage supply chain disruptions are costly and hence increase the pressure on companies to increase prices,” said John Graham, a Fuqua finance professor. “What is more, these supply chain challenges are shaving 5 percent off their revenue growth, on average.”

Firms indicate that hiring difficulties are an even more pressing concern than are supply chain challenges. Seventy-four percent of CFOs report that their companies are having difficulty filling open positions. Among these firms, 82 percent are increasing starting wages – by an average of 9.8 percent – in an attempt to fill these vacancies, and 33 percent are implementing or exploring automation to replace workers.

CFOs continue to anticipate employment and revenue growth. However, CFO optimism for both the U.S. economy and their own firms’ financial prospects has moderated. When asked to rank optimism about the overall U.S. economy on a scale of 0 to 100, the average rating from CFOs was 59.9, down from the 69.0 reading in the second quarter. CFOs also expressed moderated optimism for their own firms’ financial prospects, with average optimism at 70.2, down from the second quarter reading of 74.9.

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