Arleen R. Thomas, CPA, CGMA, AICPA Senior Vice President, Management Accounting & Global Markets
NEW YORK (June 2, 2016) – Business executives are feeling more confident about the U.S. economy’s prospects than last quarter, but remain more guarded in outlook than they were a year ago, 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.
Some 37 percent of survey takers expressed optimism about the U.S. economy over the next 12 months, up from a three-year low of 28 percent last quarter. That measure stood as high as 68 percent in the first quarter of 2015, however. Profit and revenue expectations also improved in the quarter, but remain below projected growth rates from a year ago.
One bright spot this quarter is hiring outlook: Some 19 percent of business executives say their organizations are ready to hire immediately, up from 15 percent last quarter. The percentage of executives who say their company needs employees but are reluctant to hire also increased from 16 percent last quarter to 18 percent.
“The good news is the slide in sentiment about the U.S. economy has reversed course and key performance indicators are pointing back up,” said Arleen R. Thomas, CPA, CGMA, the AICPA’s senior vice president of management accounting and global markets. “But there’s a long way to go to get back to the levels of optimism we saw in late 2014 and early 2015. On top of that, the presidential election and global economic uncertainty add some wild cards going forward.”
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— rose five points in the second quarter to 68, but still remains well below a post-recession high of 78 set in the fourth quarter of 2014. 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. All categories of the index either rose or were unchanged since last quarter, but are below what they were a year ago.
Other key findings of the survey:
Another upbeat signal on staffing. The projected headcount increase for the next 12 months rose to 1.1 percent from 0.5 percent last quarter. Business executives have some concern about the talent pool, however – “availability of skilled personnel” rose two spots to the No. 3 top challenge for businesses in the quarter.
Survey takers have a stronger view of their own companies’ prospects. In the first quarter, optimism about business executives’ own organizations fell below 50 percent for the first time since the end of 2012. This quarter, that category rebounded smartly, increasing nine percentage points to 53 percent.
A more expansive view of expansion plans. Some 58 percent of business executives said they expect their companies to expand in the next 12 months, up six percentage points from last quarter.
Spending priorities. Technology continues to be the strongest category for anticipated spending growth, climbing 0.3 percentage points from last quarter to 2.6 percent. Other capital spending also rose to 2.1 percent from 1.5 percent, quarter over quarter
Deflation recedes as a concern. In a reversal from last quarter, inflation is once again a bigger concern than deflation. Some 23 percent of executives listed it as a potential issue, compared to 12 percent for deflation. Raw material costs, followed by labor costs, are the biggest component of anticipated inflationary pressures.
The second quarter AICPA Business and Industry Economic Outlook Survey was conducted May 10-26 2016, and included 744 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.