It was a tough winter for most European economies. Elevated inflation, even if already easing, weighed especially on the purchasing power of households and businesses. Restrictive monetary policy weakened demand for goods and services and increased financing costs in Europe and many other countries. Meanwhile, uncertainty about the economy and geopolitical tensions made both consumers and businesses hesitant to increase their spending or investments. These challenges seem to be becoming less severe, however, as the spring 2024 edition of Deloitte’s European CFO Survey signals optimism is rising among finance executives.

Business sentiment is rising among European CFOs

The survey, which took place between March and April 2024, included more than 1,300 CFOs across 13 countries in Europe. It finds increasing optimism, as 36% of CFOs are now feeling ‘more optimistic’ about their companies’ financial prospects than three to six months earlier (compared to 22% in the autumn 2023), whereas 20% reported feeling ‘less optimistic’. The remaining 45% reported an unchanged outlook (figure 1). Hence, the net balance of business confidence, which measures the difference between the share of positive and negative responses, increased to +16, up from -12 in autumn 2023 and above the average of 3 since the survey began in 2015. This indicates that the outlook is generally improving for European CFOs, but overall, many remain cautious. Sentiment recovered in 12 of the 13 countries is represented in the survey. Ireland was the exception, but for encouraging reasons: There, already positive sentiment remained unchanged at a high level. (Irish CFOs continue to be the most optimistic in Europe.) Meanwhile, CFOs in Spain reported the second-highest level of optimism, which is not surprising given the Spanish economy has performed better than most European countries in the past six months. On the other end of the spectrum are Italy and the Netherlands. Even though business sentiment among Italian and Dutch CFOs is better than six months ago, the net balance is the lowest among the 13 countries participating in the survey.

CFOs in the construction, retail and tourism sectors are the most optimistic

Business confidence has risen in all sectors except for tourism and travel, where it had already plateaued at an elevated level. Tourism and travel was the most optimistic sector when we last conducted our survey in autumn 2023, and it is still profiting from a post-pandemic recovery, but in the spring, optimism in the construction sector took the lead. CFOs in the construction industry have reported a marked improvement in sentiment, with one of the factors boosting their confidence certainly being the expected interest rate cut, with the first cut from the ECB already seen this month. A rebound in business sentiment is also evident among retailers, as easing inflation and robust wage growth should fuel more consumer spending.

Confidence among CFOs in the automotive sector also improved. However, the net balance is still below the zero line, indicating that more automotive CFOs describe their financial prospects as ‘less optimistic’ than those who describe them as ‘more optimistic’. European auto manufacturers still face many challenges, although to a smaller extent than in the autumn.

Is cautious optimism here to stay?

Taken overall, these findings represent a welcome improvement after a challenging winter marked by sluggish economic activity, strict monetary policy and geopolitical instability. Whether or not they signal a more lasting upswing in business sentiment, however, will depend on many factors. These include the future trajectory of disinflation and the timing of further interest rate cuts by central banks. Meanwhile, CFOs will also be closely watching how existing geopolitical conflicts evolve. Finally, the results of upcoming elections will also significantly influence their view of the future business landscape.

You can read the full report here: European CFO Survey Spring 2024 | Deloitte Insights