Business Executives Take Dimmer View of U.S. Economy

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Business executives grew less confident about prospects for the U.S. economy over the past quarter, and are reining in profit and revenue expectations for their organizations in the coming year, according to the second quarter AICPA Economic Outlook Survey, which polls chief executive officers, chief financial officers, controllers and other certified public accountants in U.S. companies who hold executive and senior management accounting roles.

While a majority (52 percent) of respondents still express optimism about the U.S. economy, there has been a significant slide in sentiment from the first quarter mark of 68 percent. The category is still up narrowly from a year ago, however, when it stood at 51 percent.

“We’re clearly seeing more caution from accounting and finance leaders amid questions about the momentum of the recovery,” said Valerie Rainey, CPA, CGMA, chair of the AICPA’s Business and Industry Executive Committee and CFO of INTTRA, a leading e-marketplace for the shipping industry based in Parsippany, N.J. “On the positive side, there are signs that businesses are investing for growth through anticipated spending on technology and training, among other categories.”

For the second straight quarter, there has been a decline in optimism about survey takers’ own businesses. That’s reflected in part through more modest expectations for growth in profit (2.4 percent) and revenue (3.2 percent) over the next 12 months, down from post-recession highs of 3.9 percent and 4.7 percent, respectively, in the fourth quarter last year.

The AICPA survey is a forward-looking indicator that tracks hiring and business-related expectations for the next 12 months. As a point of comparison, the U.S. Department of Labor’s May employment report, scheduled to be released tomorrow, looks back on the previous month’s hiring trends.

The CPA Outlook Index—a comprehensive gauge of executive sentiment within the AICPA survey— fell two points in the second quarter to 72, the second consecutive drop. The index is a composite of nine, equally weighted survey measures set on a scale of 0 to 100, with 50 considered neutral and greater numbers signifying positive sentiment.

Other key findings of the survey:

• Sentiment about the global economy remains negative – only 28 percent of survey takers expressed optimism about this category
• Hiring remains stable. About 55 percent of respondents say their businesses have the right amount of staff. Twenty-one percent said they have plans to hire immediately, which is in line with last quarter’s survey.
• Most companies (61 percent) expect to expand. Some 22 percent expect to stay the same size, while 17 percent expect to contract. Only 53 percent of the largest businesses ($1 billion-plus in sales) expect to expand, however, down from 77 percent in the previous quarter.
• Optimism for the retail trade leapt dramatically to 85 percent, and headcount is expected to rise 4.6 percent for the sector in the next 12 months, tops for any industry. The technology sector continues to be volatile, with optimism dropping after a sharp increase last quarter.
• While optimism in the construction sector declined to 63 percent from a high of 87 percent in the first quarter, growth in construction hiring is expected to be strong at 3.2 percent after falling off in the first quarter to 2.7 percent.

Methodology

The second quarter AICPA Business and Industry Economic Outlook Survey was conducted May 12-27, 2015, and included 570 qualified responses from CPAs who hold leadership positions, such as chief financial officer or controller, in their companies. The overall margin of error is less than 3 percentage points. A copy of the report can be found on aicpa.org.

About the AICPA

The American Institute of CPAs (AICPA) is the world’s largest member association representing the accounting profession, with more than 400,000 members in 128 countries, and a history of serving the public interest since 1887. AICPA members represent many areas of practice, including business and industry, public practice, government, education and consulting.

The AICPA sets ethical standards for the profession and U.S. auditing standards for private companies, nonprofit organizations, federal, state and local governments. It develops and grades the Uniform CPA Examination, and offers specialty credentials for CPAs who concentrate on personal financial planning; forensic accounting; business valuation; and information management and technology assurance. Through a joint venture with the Chartered Institute of Management Accountants (CIMA), it has established the Chartered Global Management Accountant (CGMA) designation which sets a new standard for global recognition of management accounting.

The AICPA maintains offices in New York, Washington, DC, Durham, NC, and Ewing, NJ.