Latest CPA Outlook Index provides grim view of the economy | AccountingWEB

Latest CPA Outlook Index provides grim view of the economy

The outlook for the U.S. economy turned negative in the third quarter for the first time since 2009 as prospects for recovery waned and concerns about a second recession rose, according to the latest AICPA Economic Outlook Survey of Chief Financial Officers, Controllers, and CPAs in executive and senior management accounting roles.
 
The CPA Outlook Index, a broad-based composite index that captures the expectations of CPA financial executives and management accountants, declined 8 points to 58 this quarter, down from 66 in the prior period.
 
"For the second consecutive quarter, the CPA Outlook Index declined as turbulence in the political and economic environment eroded the sense earlier this year that a recovery was taking hold," said Carol Scott, AICPA vice president for business, industry, and government. "A majority of our CPA members in executive financial roles now fear a second recession may be likely."
 
The decline in the CPA Outlook Index was fueled by a sharp drop in sentiment about the U.S. economy. A 61 percent majority of respondents said they think it is "somewhat likely" or "very likely" the U.S. will fall into a "double-dip" recession. Only 9 percent of CPAs serving in executive positions expressed optimism about the U.S. economy in the third quarter, down 24 percentage points from 33 percent who were optimistic in the second quarter.
 
While President Barack Obama presented his plan to boost jobs in the U.S. to a joint session of Congress last week, the survey shows the hiring outlook in the U.S. remains flat. Only 10 percent of companies have current hiring plans, down slightly from 12 percent three months earlier. 
 
Although the outlook for the economy has turned negative, 41 percent of respondents remained optimistic about the prospects for their own organizations.
 
"Hopefully the continued optimism that people have about their own companies holds up and we are in for a period of very slow growth rather than a recession," said Jim Morrison, chief financial officer of Teknor Apex Co. "With the uncertainty in our political situation, the volatility in the markets, and drumbeat of negative economic indicators, it is difficult for a business person to maintain the confidence to take meaningful actions."
 
The CPA Outlook Index is a composite of nine survey measures at equal weights measured on a scale from 0 to 100 with 50 signifying a neutral outlook. The index showed a similar decline in sentiment about the U.S. economy in late 2007 and early 2008 as the U.S. slipped into recession ahead of the financial crisis. Pessimism is the highest in the survey since 2009.
 
Among the challenges businesses face, political and economic instability for the first time ranked No. 2. Continued weakness in customer demand ranked as respondents' No. 1 problem.
 
Fifty-three percent of companies still expect their businesses to expand over the next year but the outlook for revenues, profits and spending plans all edged lower this quarter. Concerns about inflation, which had been rising on higher energy and commodity costs, declined. 
 
Methodology

The third quarter AICPA Business and Industry Economic Outlook Survey was conducted August 10-29 and included 1,305 qualified responses from CPAs who hold leadership positions, such as chief financial officers or controllers in their companies. The overall margin of error is less than plus-or-minus 3 percentage points.

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