Economic Optimism Among CPAs Climbs Upward: AICPA

The number of CPAs and financial executives who are optimistic about the US economy has surpassed the 50 percent mark for the first time since the recession, according to results of a new survey released by the American Institute of CPAs (AICPA) on Thursday.

This improved economic optimism has bolstered the outlook for company prospects and their plans for expansion, spending, and hiring, the AICPA noted in its second quarter Business and Industry US Economic Outlook Survey. The number of companies optimistic about their own prospects improved from 59 percent in the first quarter of 2014 to 61 percent in the second quarter, while 64 percent have plans for expansion in the second quarter, up from 63 percent.

The survey, which is released by the AICPA each quarter, tracks hiring and business-related expectations for the next 12 months. For this most recent study, the AICPA polled 1,810 CPAs who hold executive and senior management accounting roles, such as CFO or controller, in their companies.

Sentiment about the economy has been a volatile category in the survey in recent years, but 51 percent of business executives now express optimism about it, up from 49 percent last quarter. In early 2009, at the height of the economic downturn, the level of optimism stood at just 5 percent.

As a result of this new-found optimism, companies are beginning to focus more on growth, hiring, and investment, said Arleen Thomas, CPA, CGMA, AICPA’s senior vice president of management accounting and global markets.

“We have to wait and see if we’ve truly turned a corner, but executives are clearly feeling more comfortable about the domestic business climate going forward,” she said in a written statement.

It’s no surprise, then, that the CPA Outlook Index – a comprehensive gauge of executive sentiment within the AICPA survey – also rose two points in the second quarter to 72, a post-recession high. 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.

Every category of the index rose quarter over quarter except “profit expectations,” which fell a point but remain solidly in positive territory at 69. The biggest gain was in “other capital spending,” which increased three points to 72. All components of the index rose year over year.

Technology Most Optimistic Sector
According to the survey, technology maintained its spot as the most optimistic sector at 72 percent. Although its optimism percentage eased a bit in the second quarter – from 73 percent to 69 percent – the construction industry took over the top spot in hiring with an anticipated headcount increase of 3.3 percent over the course of the next 12 months. This is up from an expected increase of 2.8 percent in the first quarter of 2014 and 2.1 percent in the second quarter of 2013.

On the flip side, manufacturing hiring plans eased from 2.1 percent to 1.7 percent as the proportion of manufacturing companies optimistic about their prospects declined from 66 percent to 62 percent.

Finance and insurance fell off again to 64 percent being optimistic after jumping to 71 percent in the first quarter. Likely consistent with the improvement in the construction industry, the real estate sector continued its rebound, increasing from 64 percent to 69 percent optimistic.

Top 10 Challenges
According to the survey, the top 10 obstacles business executives are facing in the second quarter are:

  1. Regulatory requirements/changes
  2. Employee and benefits costs
  3. Availability of skilled personnel (up from No. 4 in Q1 of 2014)
  4. Domestic economic conditions (down from No. 3 in Q1 of 2014)
  5. Domestic competition
  6. Domestic political leadership
  7. Developing new products/services/markets
  8. Stagnant/declining markets
  9. Changing customer preferences
  10. Staff turnover (not ranked in Q1 of 2014)

About the survey:
The second quarter AICPA Business and Industry US Economic Outlook Survey was conducted from May 13 to 29 and included 1,810 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 2.3 percentage points.

Related article:

Economic Forecast Seems Sunnier for CPAs and Executives

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