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Confidence in Economy Drops Among CPA Executives

Sep 14th 2015
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Just how upbeat are executive-level CPAs in private and public business and industry?

The American Institute of CPAs' third-quarter Business & Industry US Economic Outlook Survey offers a glimpse at their expectations for the next 12 months, highlighting responses in five key categories:

  • Overall economic outlook
  • Performance indicators
  • Hiring plans
  • Industry, region, and business size outlook
  • Top challenges

Here are the key takeaways.

1. Overall economic outlook. CPA executives who indicated an upbeat view of the economy dropped to 48 percent in the third quarter. That marks the first time since the first quarter of 2014 that optimism fell below 50 percent.

Yet when it comes to their own organizations, 59 percent of CPAs were optimistic – a slight increase from the second quarter's 58 percent. And 60 percent indicated that their companies plan to expand in the next year. Why? They cited construction, employment, and lower oil prices.

Those CPAs who weren't so upbeat cited concerns about the global economy, as well as “regulation/leadership/political gridlock.”

2. Performance indicators. Slight gains are the name of the game here.

Projected revenue increases rose from 3.2 percent to 3.3 percent, and profit expectations also increased – from 2.4 percent to 2.6 percent.

The ability to raise prices for products and services over the next 12 months increased two-tenths to 1.6 percent.

Healthcare cost increases still are expected to be higher than other costs, but that has remained constant all year long.

For planned expenditures, IT is the biggie, with a 3 percent increase. Other capital spending plans are projected at a 2.5 percent increase, but training dropped to 1.4 percent.

3. Hiring plans. No one appears to be on a hiring spree, with 52 percent of respondents saying they've got the right number of employees. Those who say they've got too many? Eight percent.

On the other hand, companies reporting too few employees but hesitant to hire rose from 14 percent to 20 percent. Those who plan to hire dropped from 21 percent to 18 percent – the lowest for the past year.

4. Industry, region, and business size outlook. Retail, wholesale, and manufacturing outlooks soured in the third quarter – particularly retail, which dropped from 85 percent to 65 percent – while construction remained steady and technology rose from 60 percent to 67 percent.

Still, the expected headcount is projected to increase in manufacturing, as well as the “healthcare other” category, which includes pharmaceuticals and medical device manufacturers. Mining and natural resources also expects a slight increase in headcount – 0.9 percent for the next 12 months.

Companies with revenues below $10 million are more confident, and those expecting to expand increased from 47 percent to 61 percent in the third quarter. Confidence among companies with revenues exceeding $1 billion rose from 53 percent to 56 percent.

But expansion plans fell for companies in the $10 million to $100 million range (from 66 percent to 62 percent) and in the $100 million to $1 billion range (from 65 percent to 60 percent).

How do things look by region? The West is the most optimistic, rising from 57 percent to 63 percent. The Midwest and Northeast are almost there, with 61 percent and 62 percent, respectively. But the South declined from 56 percent to 54 percent.

5. Top challenges. Here's the top 10 list:

  1. Regulatory requirements and changes (holding the same position for the past 12 months)
  2. Employee and benefits costs
  3. Availability of skilled personnel
  4. Domestic economic conditions
  5. Domestic competition
  6. Stagnant/declining markets
  7. Developing new products, services, and markets
  8. Changes in customer preferences
  9. Domestic political leadership
  10. Global economic conditions

Related article:

US Financial Executives More Cautious about Economy


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