CPA Executives’ Economic Optimism Highest Since 2004by
The economic optimism of senior-level CPA executives is the highest in more than a dozen years, and a first-quarter 2017 survey from the American Institute of CPAs (AICPA) shows a significant increase in that optimism year-over-year.
The AICPA Economic Outlook Survey tracks the hiring and business-related expectations of CPAs in executive and management positions for the year ahead.
The number of CPA executives who are optimistic about the US economy increased from 28 percent in the first quarter of 2016 to 69 percent in the first quarter of 2017, the highest number since 2004, the survey’s first year.
Organizational optimism rose from 44 percent to 66 percent, and the percentage of companies with expansion plans also increased from 52 percent in the first quarter of 2016 to 67 percent this quarter.
That optimism also was evident in the CPA Outlook Index, which increased two points in the first quarter of 2017 to 76, nearly matching the level last seen in the fourth quarter of 2014. The CPA Outlook Index measures executives’ expectations in nine economic indicators over the next 12 months.
While the index shows a slight uptick from the fourth quarter of 2016 to the first quarter of 2017 in most economic metrics, all showed notable increases compared to the first quarter of last year. Optimism in the US economy jumped 32 points, from 47 to 79, and it rose three points over the fourth quarter of 2016.
The remaining eight economic indicators include:
- Organizational optimism: Up 14 points year-over-year; up three points from the fourth quarter.
- Expansion plans: Up 14 points year-over-year; up three points from the fourth quarter.
- Revenue: Up 13 points year-over-year; up three points from the fourth quarter.
- Profits: Up 14 points year-over-year; no change from the fourth quarter.
- Employment: Up 12 points year-over-year; up three points from the fourth quarter.
- IT spending: Up five points year-over-year; up one point from the fourth quarter.
- Other capital spending: Up four points year-over-year; down two points from the fourth quarter.
- Training and development: Up six points year-over-year; up two points from the fourth quarter.
“We saw a big jump in economic optimism following the election, and that has been reinforced and extended in our latest results,” said Arleen Thomas, CPA, CGMA, managing director of Americas Market, Global Offerings & CGMA Exam, Management Accounting for the Association of International Certified Professional Accountants. “Much of this positive sentiment is due to expectations of lower corporate taxes and reduced regulation under the new administration. I expect business executives will be monitoring progress on these goals closely.”
With corporate taxation a key issue under the Trump administration, 31 percent of respondents indicated they expect a proposal to lower federal corporate income taxes to be enacted this year, while 50 percent said it would be enacted eventually but not until at least 2018.
Lower taxes would positively affect 51 percent of respondents’ companies, with 40 percent indicating they would increase capital expenditures and business expansion spending.
Here’s how CPA executives ranked their companies’ top challenges for the first quarter of 2017:
- Employee and benefits costs.
- Regulatory requirements/changes.
- Availability of skilled personnel.
- Domestic economic conditions.
- Domestic competition.
- Changing customer preferences.
- Domestic political leadership.
- Developing new products/services/markets.
- Staff turnover.
- Materials/supplies/equipment costs.
Survey results are based on responses from 930 CPAs who hold leadership positions, such as CFO or controller, in their companies.
The majority (66 percent) were from private companies, 15 percent from public companies, and 16 percent from nonprofits. Nearly half (45 percent) of respondents work for companies with $10 million to under $100 million in annual revenues, 22 percent were from organizations with under $10 million in revenues, and 13 percent came from organizations with revenues of $1 billion or more.
Terry Sheridan is an award-winning journalist who has covered real estate, mortgage finance, health care, insurance, personal finance, and accounting and taxation issues for newspapers, magazines, and websites. A Chicago native and former South Florida resident, she now lives in New England.