Business leaders in the finance and accounting industries are taking a cautious view of their expectations for profit, revenue, and expansion in the coming year. That’s the major finding of the first quarter AICPA Economic Outlook Survey, which polls chief executive officers, chief financial officers, controllers and other certified public accountants in US companies.
While optimism about these key performance indicators is still high, and the outlook for the economy in general is still positive, it is less so than was reported in the fourth quarter of last year. The CPA Outlook Index—a comprehensive gauge of executive sentiment within the AICPA survey— fell four points in the first quarter to 74, the first time it’s dropped since the fourth quarter of 2012. 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.
Year over year comparisons for each component are either positive or flat. Optimism, revenue and expansion plans continue to be strong and employment plans continue to be the softest index component.
“It’s important to note that we’re seeing higher optimism on most business indicators we track than we did a year ago,” said Arleen R. Thomas, CPA, CGMA, AICPA’s senior vice president of management accounting and global markets. “But it’s also clear we’re seeing a reset this quarter on expectations for several key categories, and that’s something to be mindful of going forward.”
The AICPA survey is a forward-looking indicator that tracks hiring and business-related expectations for the next 12 months. As a point of comparison, the U.S. Department of Labor’s February employment report, released March 6, looks back on the previous month’s hiring trends.
Among other findings of the survey:
- “Domestic Competition” is now the No. 2 challenge for businesses, up three spots from last quarter. “Regulatory Requirements/Changes’ remains the top challenge.
- The number of survey takers who said their businesses are hiring immediately dropped slightly from 23 percent last quarter to 21 percent this quarter. A majority of respondents (52 percent), however, continue to say they have the right amount of employees.
- Some 64 percent of businesses said they expect to expand in the next year, down from 71 percent last quarter.
- Anticipated growth for profits in the coming year dropped from 3.9 percent last quarter to 2.8 percent. Revenue growth expectations also fell from 4.7 percent to 3.6 percent.
- Some 47 percent of survey takers said the decline in oil prices has had a somewhat positive impact on their business, while 28 percent said it was neutral.
The first quarter AICPA Business and Industry Economic Outlook Survey was conducted Feb. 10-26, 2015, and included 848 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.