Senior-level CPA executives are planning to increase their spending next year, but lingering pessimism about the pace of the recovery means they remain reluctant to expand hiring.
The outlook for the economy nevertheless improved in the fourth quarter, according to a quarterly survey of CFOs, controllers and CPAs in executive and senior management accounting roles, released Tuesday by the American Institute of CPAs.
The survey’s CPA Outlook Index rose 6 points to 64 in the fourth quarter, mostly offsetting an 8-point decline in the third quarter. Much of the increase in the index can be attributed to growing optimism about the U.S. economy.
“We saw improvements in every category of the index, including sentiment about prospects for the U.S. economy,” said AICPA vice president for business, industry and government Carol Scott. “However, serious concerns about the business climate remain, reflected by continued reticence for new investment and hiring.” She noted, for example, that the stock market has continued to post wild swings lately.
The percentage of survey respondents who expressed optimism about the U.S. economy rose from 9 to 19 percent since the last quarter. However, 40 percent of the survey respondents described themselves as pessimistic or very pessimistic about domestic conditions, making the outlook for the U.S. economy the only negative measure on the index. Uncertainty surrounding the U.S. economy was cited as the top challenge for business and industry in the future, followed by regulatory burdens and employee and benefit costs.
On the positive side, 59 percent of the CPA executives polled said they expect their businesses to expand at least a bit in the next 12 months. Plans for spending on information technology, other capital expenditures and training are at their highest level since the third quarter of 2007. IT spending is projected to lead the pack with a 2.7 percent increase. Marketing expenses are also expected to increase as businesses seek expansion opportunities.
“Executives are feeling better about their own companies’ prospects than they are about the U.S. economy as a whole, but caution is still the word of the day for most businesses.” said AICPA board member Jim Morrison, who is CFO of Teknor Apex Co., a plastics manufacturer in Pawtucket, R.I. He noted that the survey results imply that companies will stay on the sidelines for hiring. Increased IT spending will allow many companies to run more efficiently with fewer people. Many companies will also have more capacity in a low-growth economy.
Fifty percent of the survey respondents said their organizations do not plan to return to pre-recession employment levels for at least 12 months, and a third do not expect to reach that level again in the foreseeable future. One in four respondents reported their companies have too few employees, but they remain reluctant to hire because of economic uncertainty.
Forty-five percent of the survey respondents believe the economy is headed for a double-dip recession, but that’s down from 61 percent last quarter.
On a regional basis, the survey respondents had a more optimistic view of their companies’ prospects than they did last quarter, with one exception—the Northeast. The Midwest has the brightest outlook.
Among industries, executives in the real estate and construction sectors remained pessimistic. Technology, manufacturing, retail trade and finance and insurance are sectors with the most optimistic outlooks.
Asked which part of the job creation recommendations from the President’s Council on Jobs and Competitiveness, chaired by GE chairman Jeffrey Immelt, would benefit them the most, 37 percent of the survey respondents said “none,” the most common response to the question. The No. 2 answer was regulatory streamlining, at 22 percent.
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