AICPA: Economic Optimism Rises Incrementally as Concerns Linger

U.S. business executives are feeling more optimistic about expansion plans and the outlook for their own companies over the next 12 months, yet still harbor deep concerns about the strength of the U.S. and global economies in the midst of a worldwide pandemic, according to the Q3/20 AICPA Economic Outlook Survey. The survey polls CEOs, CFOs, controllers and other certified public accountants in U.S. companies who hold executive and senior management accounting roles.

Only 24% of business executives said they held an optimistic view of the U.S. economy over the coming year. That’s a slight increase from 20% last quarter, which represented the dimmest outlook for the United States since Q4/11. Optimism about the global economy also rose modestly in the past quarter from a dismal 11% to 17%.

Some 43% of survey respondents said their companies plan to expand in the next 12 months, up from 24% last quarter. Business executives’ optimism about their own companies’ prospects saw a similar rise from 30% to 41% on a quarter-over-quarter comparison. For perspective, however, the latter number stood at 61% a year ago.

“This has been the worst economic and humanitarian crisis on a global scale in our lives, one that will have a long-lasting impact on almost every aspect of life, from where we live, work and shop, to how we travel and vacation,” Ash Noah, CPA, CGMA, managing director of CGMA learning, education and development for the Association of International Certified Professional Accountants, said. “In the midst of most trends being upended, we’re seeing improvement in a number of categories this quarter but it’s worth remembering we’re digging out of a very deep hole of pessimism. Comparisons are still tracking with the years immediately following the Great Recession. We’re also seeing the usual uncertainty over the outcome of the presidential election, which — given our current state of political polarization — adds to businesses’ sense of unease and volatility.”

The AICPA survey is an indicator that tracks hiring and business-related expectations for the next 12 months. In comparison, the U.S. Department of Labor’s August employment report looks back on the previous month’s hiring trends.

The CPA Outlook Index — a gauge of executive sentiment within the AICPA survey— rebounded into positive territory. It now stands at 54, up from 38 last quarter (its lowest level since early 2009). The index is a composite of nine, equally-weighted survey measures set on a scale of zero to 100, with 50 considered neutral and higher numbers signifying positive sentiment.

Other Key Findings of the AICPA Survey

    • Revenue and profit expectations have stabilized somewhat. Last quarter, business executives predicted that these two KPIs would slide 5% or more over the next 12 months. This quarter’s forecast still calls for declines but much slighter: -1.2% percent for profits and -0.5% for revenue.
    • Fifty-five percent of business executives said their companies have the right number of employees. Fewer survey respondents said they have an excess number of employees (16% this quarter vs. 25% last quarter), and more said they have too few employees and plan to hire immediately (13% this quarter versus 7% last quarter). Headcount growth for the next 12 months is expected to be flat.
    • “Domestic economic conditions” remain the top challenge for businesses, but “domestic political leadership” jumped four spots from last quarter to No. 2 as more focus comes to bear on 2020 elections. “Employee and benefit costs” jumped six spots to take the No 3 spot.
    • Last quarter, only one employment sector was expected to show growth over the next 12 months. This quarter, seven sectors expected to show growth over the next 12 months, led by technology (1.5% anticipated growth). On the other end of the spectrum, hospitality and food services (which includes travel and leisure) is expected to shrink 3.6%.
    • Fourteen percent of companies said their current cash position is either dire or concerning, while 85% said their position is either strong or acceptable. Sixty percent of business executives said they had at least some concern about liquidity in the coming year, with 10% reporting significant concern.

The Q3/20 AICPA Business and Industry Economic Outlook Survey was conducted from July 18 to Aug. 28 and included 1,067 qualified responses from CPAs who hold leadership positions, such as CFO or controller, in their companies. The overall margin of error is fewer than three percentage points.

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