CPA executives in business, industry, and government are optimistic for the first time in two years as business leaders gain confidence that improvements in the U.S. economy will translate to better results for their organizations, according to the American Institute of Certified Public Accountants (AICPA) and the University of North Carolina’s Kenan-Flagler Business School’s Quarterly Economic Outlook Survey.
Measures of optimism versus pessimism among CPA financial executives registered a combined 28 percentage-point swing toward a more positive outlook, the largest shift in sentiment since the fourth quarter of 2007, when the AICPA-UNC Quarterly Economic Outlook turned sharply negative as the U.S. economy headed into a recession.
“Our latest survey shows a significant shift toward optimism among our CPA members serving in executive positions in business, industry, and government,” Carol Scott, AICPA vice president for business, industry, and government, said of the survey. “These results should be taken as a very positive indicator. As financial executives charged with running companies and meeting payrolls, CPAs are on the frontlines in this economy and their views on the direction of business conditions are well-informed and sophisticated.”
Corporate optimism and expansion expectations continue to improve, and are close to levels last seen more than two years ago – prior to the start of the recession, according to Mark Lang, Ph.D., UNC Kenan-Flagler accounting professor.
“Optimism is broad-based with only construction remaining pessimistic overall, but even there we are seeing improvements,” Lang said. “Spending and employment are beginning to expand, suggesting the basis for a gradual but sustainable recovery.”
Fifty-one percent of survey respondents expressed more confidence about the prospects for their own organizations, an increase from 41 percent in February. At the same time, the number of CPAs who are pessimistic about their own organizations dropped to 20 percent, down from 24 percent in the prior quarter.
Forty percent of CPA executives expressed optimism about the broader U.S. economy in the latest survey, a sharp increase from 25 percent who were optimistic in February. Twenty-five percent were pessimistic about the economy, down from 38 percent earlier this year.
As optimism has returned, so have concerns about inflation. Forty-two percent of CPA financial executives are now concerned about the impacts of inflation on their business in the next six months. Last quarter only 32 percent were concerned.
Pessimism continues to be strongest among companies in the construction, real estate, and health care sectors. While the construction sector remained the most pessimistic with 36 percent of respondents expressing pessimism, this still was a marked improvement from the first quarter when 50 percent of respondents were pessimistic. Optimism was most prevalent in the agriculture, manufacturing, wholesale, transportation, and warehousing industry segments, along with the technology sector.
Sixty-three percent of respondents believe U.S. business conditions will not return to pre-recession levels until 2012 or later. Thirty-one percent said conditions would return to pre-recession levels in 2011, and 2 percent said activity would rebound this year.
The AICPA/UNC Kenan-Flagler Economic Outlook Survey includes two indices, the Corporate Expansion Index (CEI) and Corporate Optimism Index (COI), that consolidate expectation and optimism trends for the economy and for respondents’ own organizations. Both indices were positive in this quarter, continuing an upward trend begun in April 2009.
The fourth quarter AICPA-UNC Business and Industry Economic Outlook Survey was conducted via an online questionnaire from April 13 through May 2, and included 1,768 qualified responses from CPAs who hold leadership positions, such as chief financial officers or controllers in their companies. The overall margin of error was less than plus-or-minus 3 percentage points.