NEW YORK--(BUSINESS WIRE)--Concerned about the outlook for both the U.S. and global economies, business executives have revised expectations downward for a number of categories that impact their companies, according to the second-quarter AICPA Economic Outlook Survey, which 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 57 percent of survey takers expressed optimism about the U.S. economy’s outlook over the next 12 months, the third straight quarter it’s held at that level since dropping from 79 percent at the start of 2018. U.S. executives also continue to hold a dim view of the global economy, with only 35 percent expressing optimism, up a single percentage point from last quarter.
In recent quarters, business executives had kept a more upbeat view of expansion prospects and their own companies’ outlook. That sentiment has gradually eroded over the course of the year, however, and both categories now stand at their lowest level since late 2016. The same holds true for 12-month revenue and profit expectations, which slid this quarter from 4.4 percent to 4.2 percent and 3.6 percent to 3.1 percent, respectively.
“While business executives’ expectations for their companies and the perceived environment those companies will be operating in over the next year have been tracking downwards, there’s been a slight disconnect between these for the past few quarters,” said Ash Noah, CPA, CGMA, managing director of CGMA learning, education and development for the Association of International Certified Professional Accountants, the global organization that includes the American Institute of CPAs (AICPA) and the Chartered Institute of Management Accountants (CIMA). “In this quarter, we’ve seen a bit of a reset and the indicators are more closely aligned. With so much uncertainty over trade and other global issues, companies are taking a more conservative stance on their potential performance.”
Availability of skilled personnel remains the top challenge for businesses, a position it has occupied since the third quarter of 2017. Two other staffing-related issues are among the top five challenges cited by survey takers this quarter: employee and benefit costs (No. 2) and staff turnover (No. 5).
With a tight labor market, business executives forecast a 2.7 percent increase in salary and benefit costs over the next twelve months, a 0.1 percent increase over last quarter’s forecast. Asked for more specifics in a separate question, some 86 percent of respondents said they expected to raise salary and wages in the next 12 months, with most (64 percent) saying they expected those increases to fall between three and five percent. Only eight percent said they didn’t expect to raise salaries and wages at all. These numbers track closely with results from the last time the question was asked at the end of 2018.
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 May 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— fell a single point to 75 from last quarter. 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 fell from 65 percent to 62 percent, quarter over quarter.
- Survey respondents who said they expect their organizations to expand in the coming year also fell three percentage points to 63 percent.
- The number of business executives who said their companies have too few employees and are ready to hire immediately edged up slightly in the quarter from 26 percent to 28 percent. Those who want to hire but are hesitant because of uncertainty also edged up a tick from 15 to 16 percent. This hesitancy to hire was particularly pronounced in the largest companies (those with over $1 billion in annual revenue), with one-in-four reporting such qualms. That’s much higher than other company segments.
- Inflation concerns slipped five percentage spots to 29 percent in the quarter and have dropped from 47 percent a year ago.
- Construction and health care providers were bright spots for positive sector outlooks in the quarter, while retail trade and manufacturing showed sharp drops in optimism.
The second-quarter AICPA Business and Industry Economic Outlook Survey was conducted from May 7-28 and included 785 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.