If CFOs had a Magic 8 Ball, it would read: “Outlook not so good.”

There is a severe decline in optimism about the economy among CFOs across the country — thanks to increasing costs of goods and services, increasing energy costs, and supply chain challenges — according to a quarterly survey.

Grant Thornton’s 2022 Q2 CFO Survey found that just 39% of CFOs have a positive outlook regarding the U.S. economy over the next six months. That continues a downward trend from 49% optimistic last quarter and 69% in the third quarter of 2021.

The survey was conducted in July with 249 respondents, all from U.S. companies.

Increasing costs of goods and services topped the list of reasons for the negative outlook, with 73% of CFOs mentioning it. It was followed by increasing energy costs (71%), supply chain challenges (66%), rate hikes (64%), and the increased cost of credit and capital (61%).

On the other hand, there are reasons for a positive outlook, according to CFOs: 65% believe the economic impact of COVID-19 is waning, and 60% say increased household wealth will continue to drive demand.

As the Fed continues to hike interest rates to slow price increases — its announcement Wednesday of a 75-basis-point jump was the third such increase since June — 72% of CFOs in the survey expect those rate increases to lead to a recession.

But 66% of CFOs surveyed still expect to meet their companies’ own growth goals.

“For some companies, inflation may be helping to drive growth,” said Enzo Santilli, Grant Thornton’s national managing partner for transformation. “Inflation can push revenue up even while volume is down. That can be good for some companies but bad for others.”

Of that 66% of respondents who say they will meet growth projections, only 61% expect an increase in net profits over the next 12 months, so some companies’ projections are neutral at best. Also, of the 61% expecting increased profits, only 15% expect growth of more than 10% — and 39% expect a contraction.

But the supply chain — which has been an issue since the pandemic hit in 2020 — is still the biggest challenge confronting CFOs. Only 54% of CFOs are confident about meeting supply chain goals — down from 62% in the first quarter.

Cybersecurity and recruitment challenges

Survey respondents listed cybersecurity as their top challenge over the next six months, with 41% citing it as a hurdle, followed by supply chain (37%) and the remote workforce (32%). Those challenges remained generally steady, while cash and liquidity jumped from 19% last quarter to 31% in the second quarter.

“The cyber threat environment continues to evolve, so the continuous investment is necessary to keep up,” said Sean Denham, Grant Thornton’s national audit growth leader. “I don’t expect to see cybersecurity fall down the challenge list anytime soon.”

CFOs are also concerned about attracting and retaining talent: 62% say a possible recession will pose a significant challenge to their recruitment and retention efforts.