Revenue growth expectations also tick down

Hiring plans strengthen

Expansion plans remain strong despite dip

December 05, 2019 07:00 AM

NEW YORK - Business executives regained some optimism about the U.S. economy after a sharp decline in the third quarter, yet continue to rein in forecasts for profit and revenue growth, according to the fourth-quarter AICPA Economic Outlook Survey. The survey polls chief executive officers, chief financial officers, controllers and other certified public accountants in U.S. companies who hold executive and senior management accounting roles.

Some 50 percent of survey takers expressed optimism about the U.S. economy’s overall outlook over the next 12 months, up from 42 percent last quarter. That’s still low for the post-recession period – positive sentiment on the U.S. economy had been as high as 79 percent in early 2018.

U.S. executives’ outlook on the global economy, while far more pessimistic, also improved in the quarter. Some 28 percent expressed optimism, up four percentage points from last quarter.

Profit growth over the next 12 months is now expected to be 2.7 percent, down from 2.8 percent last quarter and significantly below the outlook of 4.3 percent a year ago. Similarly, 12-month revenue growth expectations dropped a tenth of a percentage point to 3.4 percent, quarter over quarter. That’s down from five percent a year ago.

“We saw a sharp drop in U.S. economic optimism in the third quarter due to the U.S.-China trade war really driving uncertainty, so this quarter represents a correction of sorts, with prospects of a reasonable outcome,” said Ash Noah, CPA, CGMA, vice president and managing director of CGMA learning, education and development for the Association of International Certified Professional Accountants. “But there also is a continued sense of unease and uncertainty about trade and growth prospects, and we’re seeing that in some of these more conservative forecasts.”

Hiring plans were a relatively bright spot this quarter. Some 43 percent of business executives said they had too few employees, compared to 38 percent last quarter. Of that cohort, 28 percent said they planned to hire immediately and 15 percent said they needed employees but were hesitant to hire. The number of respondents who said their companies had too many employees dropped a percentage point to eight percent, quarter over quarter.

The AICPA survey is a forward-looking indicator that tracks hiring and business-related expectations for the next 12 months. In comparison, the U.S. Department of Labor’s November employment report, scheduled for release tomorrow, looks back on the previous month’s hiring trends.

The CPA Outlook Index—a comprehensive gauge of executive sentiment within the AICPA survey— remained unchanged from last quarter at 72 points. The index is a composite of nine, equally weighted survey measures set on a scale of 0 to 100, with 50 considered neutral and greater numbers signifying positive sentiment.

Other key findings of the survey:

• The percentage of U.S. executives who expressed optimism about their own company’s prospects over the next 12 months remained unchanged at 58 percent, quarter over quarter.

• Survey respondents who said they expect their organizations to expand in the coming year fell two percentage points to 59 percent and has dropped eight percent year over year.

• Availability of skilled personnel remains the top challenge for businesses, a position it has occupied since the third quarter of 2017.

Methodology

The fourth-quarter AICPA Business and Industry Economic Outlook Survey was conducted from Oct. 31 to Nov. 20 and included 907 qualified responses from CPAs who hold leadership positions, such as chief financial officer or controller, in their companies. The overall margin of error is less than 3 percentage points. A copy of the report can be found on aicpa.org.

About the American Institute of CPAs

The American Institute of CPAs (AICPA) is the world’s largest member association representing the CPA profession, with more than 429,000 members in the United States and worldwide, and a history of serving the public interest since 1887. AICPA members represent many areas of practice, including business and industry, public practice, government, education and consulting. The AICPA sets ethical standards for its members and U.S. auditing standards for private companies, nonprofit organizations, federal, state and local governments. It develops and grades the Uniform CPA Examination, offers specialized credentials, builds the pipeline of future talent and drives professional competency development to advance the vitality, relevance and quality of the profession.

About the Association of International Certified Professional Accountants

The Association of International Certified Professional Accountants (the Association) is the most influential body of professional accountants, combining the strengths of the American Institute of CPAs (AICPA) and The Chartered Institute of Management Accountants (CIMA) to power opportunity, trust and prosperity for people, businesses and economies worldwide. It represents 657,000 members and students across 179 countries and territories in public and management accounting and advocates for the public interest and business sustainability on current and emerging issues. With broad reach, rigor and resources, the Association advances the reputation, employability and quality of CPAs, CGMAs and accounting and finance professionals globally.