Economic Forecast Seems Sunnier for CPAs and Executives

There is increased optimism about the US economy among business executives, as more are anticipating modest growth in recruitment, staff training, and targeted capital spending in the next year, according to results of a new survey released today by the American Institute of CPAs (AICPA).

The AICPA Business and Industry Economic Outlook Survey tracks hiring and business-related expectations for the next 12 months. For this most recent study, the AICPA polled nearly 870 CEOs and CPAs who hold leadership positions, such as CFO or controller, in their companies.

The CPA Outlook Index – a comprehensive gauge of executive sentiment within the survey – rose a single point to 70 in the first quarter of 2014, a post-recession high, according to the AICPA. The index is a composite of nine, equally weighted survey measures set on a scale of zero to 100, with 50 considered neutral and greater numbers signifying positive sentiment.

Economic optimism – traditionally the most volatile category from quarter to quarter – was the biggest gainer among index components in the latest survey, up from 38 percent in the fourth quarter of 2013 to 49 percent in the first quarter of this year. That first quarter number matches the post-recession high set in the second quarter of 2013, according to the AICPA.

In addition, CPAs and business executives are feeling better about the prospects for their own companies over the next year – 59 percent this quarter versus 57 percent last quarter.

“We’re seeing signs that businesses are thinking more concretely about resources they’ll need in place – from expanded staffing to investments in technology and other capital projects – to handle future growth,” Arleen Thomas, CPA, CGMA, AICPA senior vice president of management accounting and global markets, said in a written statement. “Business expansion expectations, while still tempered, are the highest they’ve been in three years.”

Hiring and Spending On the Rise
On the hiring front, 56 percent of survey respondents reported their companies have the right number of employees; however, 15 percent said they planned to hire immediately – up from 13 percent last quarter. CPAs and business executives who said their companies had too many employees dropped from 10 percent last quarter to 8 percent this quarter.

A majority of companies (75 percent) with hiring plans said they are seeking full-time workers. Only 2 percent said they were predominantly seeking part-time or temporary workers.

In addition, spending plans are showing new post-recession highs in all key categories. Increased spending for IT continues to be the strongest category, improving in the first quarter to 3.2 percent. Other capital spending rose to a new post-recession high of 2.3 percent. Also, consistent with the improved expectations for increased hiring, the projected rate of higher spending for employee training and development has also reached a new mark of 1.7 percent, according to the survey.

Top Hurdles
The biggest challenges facing businesses reflect the improved economy but also increased regulation. According to the survey, the top 10 obstacles business executives are facing are:

  1. Regulatory requirements/changes
  2. Employee and benefit costs
  3. Domestic economic conditions
  4. Availability of skilled personnel (up from No. 6 in Q4 of 2013)
  5. Domestic competition
  6. Domestic political leadership (down from No. 4 in Q4 of 2013)
  7. Developing new products/services/markets (up from No. 8 in Q4 of 2013)
  8. Stagnant/declining markets (down from No. 7 in Q4 of 2013)
  9. Changing customer preferences
  10. Materials/supplies/equipment costs

The following are other key findings of the AICPA survey:

  • Almost 69 percent of survey takers said their companies will offer bonuses or incentives this year – predominantly cash – while another 12 percent are weighing options. As expected, bonuses became less prevalent during the recession, but appear to be on the rise again, according to the survey.
  • Some 63 percent of business executives said they expect their companies to grow at least a little in the coming year, the highest percentage since the first quarter of 2011.
  • Among key performance indicators, anticipated revenue growth was flat compared to last quarter. Profit and headcount expectations showed improvement.
  • Technology continued to build on its position as the most optimistic sector, followed by construction. Health care and health care providers were the least optimistic. The finance and insurance sectors rebounded strongly in sentiment in the first quarter.

About the survey:
The first quarter AICPA Business and Industry Outlook Survey was conducted from February 11 to 26 and included 867 qualified responses from CPAs who hold leadership positions, such as CFO or controller, in their companies. The overall margin of error is less than plus-or-minus 3 percentage points.


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