US Finance Executives More Cautious about Economy

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Allegra Nagler
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Despite 52 percent of CEOs, CFOs, and other senior business executives expressing optimism about the US economy in the second quarter, many are less confident and are reining in profit and revenue expectations for the coming year, according to the most recent economic forecast from the American Institute of CPAs (AICPA).

The percentage of finance executives who are optimistic about the economy is a significant drop from the first-quarter mark of 68 percent, according to the AICPA, which released its second-quarter Business & Industry Economic Outlook Survey on June 4.

The report tracks hiring and business-related expectations for the next 12 months. For this most recent study, the AICPA received responses from 570 CPAs who hold leadership positions, such as CFO or controller, in their companies.

The CPA Outlook Index – a comprehensive gauge of executive sentiment within the survey – fell two points in the second quarter to 72, the second consecutive drop. 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.

“We're clearly seeing more caution from accounting and finance leaders amid questions about the momentum of the recovery,” Valerie Rainey, CPA, CGMA, chair of the AICPA Business and Industry Executive Committee, said in a written statement.

There was a decline in optimism about survey-takers' own businesses for the second straight quarter, reflected in more modest expectations for growth in profit (2.4 percent) and revenue (3.2 percent) over the next 12 months. This is down from post-recession highs of 3.9 percent and 4.7 percent, respectively, in the fourth quarter of last year.

On the positive side, hiring remains stable. About 55 percent of respondents said their businesses have the right amount of staff, and 21 percent noted they have plans to hire immediately, which is in line with last quarter's survey.

In addition, most companies (61 percent) expect to expand. Some 22 percent plan to stay the same size, while 17 percent expect to contract. Only 53 percent of the largest businesses ($1 billion-plus in sales) expect to expand, however, down from 77 percent in the previous quarter.

“There are signs that businesses are investing for growth through anticipated spending on technology and training, among other categories,” Rainey said.

Optimism is especially high for the retail trade, which leapt dramatically to 85 percent, with headcount predicted to rise 4.6 percent over the next 12 months, the highest of any industry.

While optimism in the construction sector declined to 63 percent from a high of 87 percent in the first quarter, growth in construction hiring is expected to be strong at 3.2 percent after falling off in the first quarter to 2.7 percent.

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