CPA executives have bleaker outlook thanks to coronavirus

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Business executives who are also CPAs have sharply reduced their outlook for profits, sales, hiring and the overall economy over the next 12 months, because of the COVID-19 pandemic, according to a new survey by the American Institute of CPAs.

The second-quarter AICPA Economic Outlook Survey polled a group of 1,198 CEOs, CFOs, controllers and other CPAs at U.S. companies who hold executive and senior management accounting roles.

Only 20 percent of survey respondents were optimistic about the U.S. economy’s overall outlook over the next 12 months, down from 61 percent in the first quarter, when concerns about COVID-19 rose in this country. The optimism metric hasn’t plummeted that low since the fourth quarter of 2011, when it was 19 percent. U.S. executives also took a gloomy view of the global economy in the second quarter, with only 11 percent optimistic.

Companies have reduced their profit and sales outlooks sharply in response to stay-at-home orders and other pandemic-related effects. Business executives now anticipate revenue will decline 5 percent in the next 12 months, compared to an expected 4.3 percent growth rate when they were polled in the first quarter of the year. Profit expectations have similarly undergone adjustment to reflect a drop of 5.5 percent, down from an expected 3.3 percent growth rate. In the first-quarter survey, less than 8 percent of business executives said their companies had made downward adjustments to their forecasts due to the pandemic. In the second quarter, 81 percent said their organizations had made such adjustments.

“Not surprisingly, this quarter’s survey documents the severe impact the pandemic has had on the outlook for U.S. businesses,” said Ash Noah, managing director of CGMA learning, education and development at the Association of International Certified Professional Accountants, in a statement Thursday. “Moving forward, the reopening or ramping up phases in different states will be critical but the rise of liquidity concerns and the uncertain social and economic environment, including potential second-wave infections and prospects of additional layoffs, continue to present an extremely challenging environment for businesses.”

The survey also found that 51 percent of the CPA businesses executives polled indicated their companies have the right number of employees, similar to the results in the first quarter. But there has been a dramatic increase (25 percent, up from 7 percent in the first quarter) in the number of companies that report they have an excess number of employees. The number of companies who said they were looking to immediately hire employees underwent the same shift but in reverse: Only 7 percent are now actively seeking job candidates, versus 26 percent last quarter.

“Domestic economic conditions” were cited as the top challenge for businesses, followed by “stagnant/declining markets” and “liquidity.” That’s significant, as liquidity hasn’t been listed among the top 10 concerns in the survey since the second quarter of 2016. Among their top pandemic-specific concerns, business executives listed 1) customer demand/ability to pay, 2) safety of employees and 3) cash, financing and capital challenges.

The proportion of U.S. executives who expressed optimism about their own organization’s prospects over the next 12 months fell from 66 percent to 30 percent, quarter over quarter. Survey respondents who said they expect their organizations to expand in the coming year dropped from 64 percent in the first quarter to 24 percent in Q2.

Information technology is the only sector tracked in the survey to not indicate an expected decline in spending over the next 12 months, but technology is only expected to have a growth rate of 0.4 percent. IT employment, however, is expected to decline 1 percent.

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AICPA Coronavirus Economic indicators