Pessimists outweighed optimists on the prospects for the U.S. economy by a two-to-one margin among CPAs serving as C-suite executives, according to a new survey.
The quarterly survey, by the American Institute of CPAs and the University of North Carolinas Kenan-Flagler Business School, found that expectations for the U.S. economy turned sharply negative on concerns about unemployment and a tight credit market.
Our survey signals the nascent economic recovery that buoyed expectations last quarter is stalling, said AICPA vice president for business, industry and government Carol Scott in a statement. Despite a decrease in confidence, CPAs serving in top finance and executive positions in business and industry are substantially more optimistic about their own organizations than they are about the broader U.S. economy. Companies that weathered the downturn have restructured, improved productivity and are poised for growth when business conditions such as customer demand, employment and credit rebound.
Only 21 percent of the 1,584 survey respondents expressed optimism about economic recovery, a sharp decrease from the 40 percent who were optimistic in May and the lowest level since April 2009. Forty percent were pessimistic about the economy, up from 25 percent in the last quarter. Measures of optimism versus pessimism registered a combined 34 percentage-point swing toward a negative outlook, reversing the 28 percentage-point shift towards optimism recorded in the prior quarter when optimists outnumbered pessimists for the first time in two years.
Seventy-eight percent of the respondents believe U.S. business conditions will not return to pre-recession levels until 2012 or later. Seventeen percent said conditions would return to pre-recession levels in 2011, and less than one percent said activity would rebound this year.
The overall results confirm that the recovery has slowed, but that managers remain cautiously optimistic, said UNC Kenan-Flagler accounting professor Mark Lang. Uncertainty about the sustainability of the recovery continues to limit planned investment and hiring. The next few months will be crucial in determining whether uncertainty resolves to the point where firms are willing to significantly increase spending and hiring. Clearly, though, executives are skeptical about increased stimulus spending or other governmental efforts to spur economic growth.
Twenty-four percent expressed more confidence about the prospects for their own organizations, a decrease from 40 percent who had more confidence in May. CPAs who are pessimistic about their own organizations rose slightly to 21 percent from 20 percent in the prior quarter. Fifty-four percent expect their business to expand in the next 12 months.
As U.S. unemployment holds steady at 9.5 percent, 55 percent of the survey respondents do not anticipate their organizations employment levels returning to pre-recession levels in the next year, compared with 7 percent who anticipate staffing levels returning to normal in the next year. Only 9 percent reported that their organizations were planning to hire in the immediate future.
As pessimism returned, fears of inflation have dropped substantially, with 24 percent citing concerns over inflation impacting their business in the next six months, compared to 42 percent who expressed concern in the last quarter. Twenty percent are now concerned their organizations will be impacted by deflation in the next six months.
The AICPA/UNC Kenan-Flagler Economic Outlook Survey includes two indices, the Corporate Expansion Index and Corporate Optimism Index, that consolidate expectation and optimism trends for the economy and for respondents own organizations. Both indices were down in this quarter for the first time since April 2009.
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