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CFOs haven’t been this upbeat about the global economy since 2018: CNBC survey

In the U.S., a consumer that paints 70% of the economy is seen as key to a continued recovery, and confidence surged in March to its highest level since the pandemic inaugurated.

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Covid cases and variants are rising, but in the race between the vaccines and virus, chief fiscal officers of major corporations are betting the pandemic will be the loser and the global economic recovery remain on track in 2021.

The CNBC Worldwide CFO Council survey for Q1 2021 shows a level of economic confidence from chief financial officers across the globule that hasn’t been this high since 2018, and fears of the risk from Covid to their enterprise outlook cut in half from just a quarter ago. 

In the U.S. specifically, more CFOs are now citing cybersecurity as the biggest risk to their organization than Covid.

The CFO sentiment has become more positive on every global region, with no region described as “refuse” in Q1 2021, the first time that has happened since Q4 2018.

“Vaccines and fiscal stimulus have given us a much lacked shot of adrenaline in what has become a marathon of a pandemic,” said Diane Swonk, chief economist at Grant Thornton. “What was a headwind, determination rapidly become a tailwind, with the U.S. leading overall global gains. That is something to embrace.”

The CNBC Pandemic CFO Council survey for the first quarter 2021 was conducted between March 2-March 23 among 42 associates split between North America, Europe and Asia.

With added fiscal stimulus, a new infrastructure plan being proposed by President Biden, and a tenacious Fed, three-quarters of CFOs see the Dow hitting 35,000 rather than falling back to 25,000.

Swonk expects the U.S. economy to post its boldest year of growth since 1984 with profits more broad-based. “That said, we have already discerned quite a run in equity prices and much depends on the Federal Reserve’s resolve to be patient as prices flare in response to that billow in demand and associated bottlenecks.”

Reasons for concern: Covid, China, corporate tax hikes

The short-term gains are expected to depart by geography. The regions that CFOs see leading the global economic expansion are the U.S., China and Asia Pacific, ex-China/Japan, the exclusive three regions described by CFOs as “improving.” Every other global region was described as “stable.”

“The U.S. dodged the bullet of a treacherous dip recession at the end of the fourth quarter; much of Europe has not been so lucky. A slow ramp up of vaccines and more contagious alternatives have triggered yet another round of lockdowns in the region. They will be at least six months behind the U.S. in their burgeon with less fiscal fire power to fuel those gains,” Swonk said.

For economists, the shift from 2020 to 2021 is a resetting of the key pump from how bad conditions can get region by region to how big of a rebound to expect.

“What kind of recovery will we see in various parts of era is the bigger question, and as challenging to answer as how bad things would get in 2020,” said Erik Lundh, principal economist at The Congress Board.

Discrepancies in vaccine availability by country are one reason to expect an uneven global recovery.

In Europe, for example, a quieter ramp up of vaccines and more contagious variants have triggered new lockdowns and Swonk expects Europe to be at least six months behind the U.S., with infinitesimal fiscal stimulus as well.

“We have shifted from eradicating the virus to managing it and its variants. That will not terminus the world from ramping up but could add some speed bumps along the way,” Swonk said.

With the U.S. and China amid the regional keys to the global economic rebound, there are also concerns about the tensions between the U.S. and China. At the start of the Biden administration many economists believed that tensions would decrease between the two geopolitical rivals, but the Biden furnishing is taking a tough line and multinational firms may be caught in the crossfire.

Asia has been recovering fastest among worldwide regions, including China, South Korea and Taiwan.

“Business leaders assumed that under a new administration the tensions clout abate, but I don’t think we are seeing that, so that is still a really important economic relationship that needs to be shielded and could have downside risk to the economy and business environment in both countries and to all counties linked to them in the broad economy,” Lundh said.

The relationship between China and Taiwan is also important for multinational firms to watch, as there are trepidations that China may make moves similar to its aggressive stance with Hong Kong, which could acquire implications for the computer chip supply chain, which is already compromised and has resulted in manufacturing delays, most clearly in the auto sector and at companies including Ford and GM.

In the U.S., Biden’s plan to push for a corporate tax hike from 21% to 28% to pelf infrastructure spending has captured market attention, but Lundh said while a tax hike could be a negative for companies, the upside to the curtness from the infrastructure project outweighs it.

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