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CPA Executives Have Gloomy Outlook on Growth Prospects

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Dec 8th 2015
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It likely comes as no surprise that the American Institute of CPAs' (AICPA) fourth quarter Business and Industry Economic Outlook Survey shows a slowly but steadily increasing gloom.

Overall expectations for revenue growth now stand at 2.9 percent, down from 3.3 percent last quarter and 4.7 percent a year ago, the survey found. Profit growth expectations, meanwhile, slid from 2.6 percent last quarter to 2 percent, almost half the rate from a year ago.

The survey's CPA Outlook Index – a composite of nine measures on a scale of 0 to 100 with 50 considered neutral – dropped two points to 69 in the fourth quarter. While that's still considered positive on the index scale, it's the fourth consecutive decrease from a high of 78 in the fourth quarter of 2014.

“We're seeing rising concern about US economic conditions and domestic competition,” Arleen Thomas, CPA, CGMA, senior vice president of management accounting and global markets for the AICPA, said in a prepared statement. “Those factors, coupled with a potential slowdown in the global economy, have contributed to a perception that growth opportunities are going to be more challenging in the near term.”

However, it's worth noting that – amid speculation about and expectation of a Fed interest rate hike this month – only 23 percent of survey respondents indicated a concern about inflation.

The survey, conducted in November, included 852 responses from CPAs in leadership positions, such as CEOs, CFOs, or controllers, in their organizations.

Here's a sampling of the takeaways from each of the index's nine indicators – and there are a few brighter spots.

US economy optimism. Dropped to 64 in the fourth quarter, continuing a decline from a peak of 80 in the first quarter, and down 14 points from the fourth quarter of 2014. Respondents who are optimistic about the economy dropped to 45 percent, down from 68 percent in the first quarter.

Organization optimism. Dropped three points to 70, and that's 10 points below the fourth quarter of 2014. About half (53 percent) of respondents indicated optimism about their organization and expansion plans, down from 67 percent in the fourth quarter last year.

Expansion plans. Dropped two points to 70; down 11 points from the fourth quarter last year.

Revenue expectations. Dropped two points to 74; down 11 points from the fourth quarter last year.

Profit expectations. Dropped four points to 67; down 12 points from last year at this time.

Employment expectations. Rose one point from the third quarter, to 67, but down six points from last year. About half (53 percent) of companies indicated an appropriate number of employees; those reporting too many employees rose from 8 percent to 10 percent, while 35 percent said they had too few. Less than a quarter (18 percent) of companies plan to hire more employees.

IT spending plans. Held steady with a yearlong index of 76-77, but was three points lower than last year's fourth quarter index of 80.

Other capital spending plans. Likewise, held steady this year at 71-72, but was three points lower than last year's 75.

Training and development plans. Dropped from an index of 75 in last year's fourth quarter to 68 in the fourth quarter of 2015.

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