Author: Mitchell Slepian

Location: New York

Date: 2012-06-08

Business executives are more guarded about the 12-month outlook for the U.S. economy than they were last quarter, according to the second quarter AICPA Economic Outlook Survey, which polls chief executive officers, chief financial officers, controllers and other certified public accountants in executive and senior management accounting roles. Most continue to see better prospects for their own companies than the economy as a whole, but concerns about hiring have intensified since the start of the year.

“What we're seeing is the same ‘two steps forward, one step back’ cycle we encountered last year”

The CPA Outlook Index—a comprehensive gauge of executive sentiment within the Economic Outlook Survey—fell two points, to 67, after two straight quarters of improvement. The index is a composite of nine equally weighted survey measures set on a scale from 0 to 100, with 50 considered neutral, numbers below signifying negative sentiment and numbers above signifying positive sentiment. The second-quarter decline mirrors last year’s trend, when a surge of optimism in the first quarter was later tempered by fears of a stalled recovery.

“What we're seeing is the same ‘two steps forward, one step back’ cycle we encountered last year,” said Arleen R. Thomas, CPA, CGMA, the AICPA’s senior vice president for management accounting. “There's no question survey takers have grown more pessimistic about the U.S. economy, and with expectations muted for profit, revenue and employment growth, there appear to be few catalysts to change that view.”

Optimism for the U.S. economy dropped nine percent this quarter, and only 1-in-3 survey takers (34 percent) described themselves as optimistic or very optimistic about domestic conditions. Yet a majority (54 percent) continues to feel upbeat about prospects for their own companies or organizations, with only 13 percent expressing pessimism.

Other findings of the survey include:

• Hiring – Most business executives (56 percent) said they have the right number of employees. But the percentage of those who said they have too many workers jumped from seven percent to 10 percent this quarter, while the number of those who said they planned to hire soon dropped from 14 percent to 12. For those eager to hire, meanwhile, half said they were having trouble finding job candidates with the right skills.
• Industry View – Executives from only two industries—health-care providers (such as hospitals and nursing homes) and construction—expressed more sector optimism this quarter than in the previous one. Retail and wholesale trade were unchanged quarter to quarter, while all other industry categories dropped.
• Business Expansion – 61 percent of senior-level CPAs said they expect their companies to expand over the next 12 months, a number unchanged from the first quarter. One area where there was a drop: Expansion plans for businesses with more than $1 billion in sales, which fell from 65 percent to 62 percent. This is the first time since early 2010 that the nation’s largest businesses are not the most likely group to have growth plans.
• Top Challenges – Survey takers have identified the same top three business hurdles in each of the past three quarters: 1) Domestic economic conditions, 2) Regulatory requirements/changes, and 3) Employee and benefit costs. There was movement within the rest of the Top 10, however; “Domestic political leadership” continued its climb to No. 4, and “Global economic conditions” jumped from No. 10 to No. 7 since last quarter.

To subscribe or visit go to:  http://www.riskcenter.com