AICPA Survey Reveals Split Decision on Economic Outlook

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By Deanna C. White, Correspondent

The fourth quarter AICPA Business and Industry US Economic Outlook Survey reveals business executives view the economic prospects for the coming year through a split screen. On the one side, they regard economic prospects for companies with optimism, but, on the other side, that optimism is tempered by an underlying pessimism about the US economy.  

This split sentiment may impact hiring plans for 2014, according to the survey, which polls chief executive officers, chief financial officers, controllers, and other CPA in US companies who hold executive and senior management accounting roles. The survey was released December 5.

AICPA officials say it is not unusual for executives to hold a rosier outlook for their own organization than for the overall state of the US economy, but the two categories "usually ebb and flow in the same direction."

This quarter, however, the outlook for individual companies is on the upswing (57 percent positive, compared to 55 percent last quarter), while optimism about the US economy is flagging, currently registering only 38 percent positive, down from 44 percent last quarter.

"The past quarter has been without major economic disruption, and we have experienced fairly steady growth globally. This steadiness gives organizations confidence about their abilities to grow and remain profitable", said Jim Morrison, CPA, CGMA, chair of the AICPA's Business and Industry Executive Committee. "At the same time, there is mounting concern that the government has the ability to impact growth in a negative way through budget negotiations and government shutdowns. This puts a negative spin on the coming months in terms of the US economy's ability to withstand those disruptions."

The impact of these diverging views is perhaps nowhere more evident than in hiring plans, which also seem to be "softening" after a boost last quarter.

According to the AICPA, business expansion expectations are almost even with last quarter's expectations – 62 percent of executives saying they expect to "grow at least a little in the coming year."

But the survey's hiring projections paint a dimmer picture. The percentage of respondents who said they are looking to hire immediately dipped slightly (from 15 percent last quarter to 13 percent this quarter), while headcount increase projections slipped from 1.3 percent to 1.2 percent in the past quarter.

"The survey indicated that as much as 12 percent of responders have delayed hiring as a direct result of the recent government shutdown. So the potential negative impact of government actions in this area is evident", Morrison said.

The AICPA emphasizes the survey is a "forward-looking indicator that tracks hiring expectations" for the coming year, as opposed to the US Department of Labor's (DOL's) November employment report, which looks back to report on the previous month's hiring trends.

According to data released December 6 by the DOL, the economy added 203,000 jobs in November, while the unemployment rate declined from 7.3 percent in to 7.0 percent. Employment increased in transportation and warehousing, health care, and manufacturing, according to those statistics.

The CPA Outlook Index – a comprehensive gauge of executive sentiment within the survey – "remains unchanged from the past two quarters at sixty-nine points." 

Prior to midyear, the ratings on the US Economic Optimism Component of the index had been up more than any other category – twenty points in fact – from this year over last year. But since midyear, growing concern among executives about regulation, employment, and the incessant political gridlock in Washington have caused those numbers to drop.

Morrison said the survey does reveal a lot of good news in terms of executives feeling a growing sense of optimism and confidence in certain segments of the economy. "The economic picture is bright in the leading sectors such as technology, manufacturing, and construction. If housing bounces back, we could experience nice growth. The fact the inflation and energy sectors are remaining steady is also a reason for optimism", Morrison said.

But continued squabbling and shutdowns on Capitol Hill could impede improvements on the overall economic front, he warns.

"Only 38 percent of survey takers expressed optimism about the US economy for the coming year, which is down six points from 44 percent last quarter", Morrison said. "If you look at expectations for profit, revenue, and other performance categories, there is little to dislike on the economic front. But the expectation of continuing government conflict could delay a more improved economy."

You can access the entire report on the AICPA website. 

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