After a dramatic drop last quarter, CPA executives regained modest optimism in the past three months about the prospects for the U.S. economy, but still believe the recovery will be slow and are cautious about expansion and hiring plans.

The latest AICPA/UNC Quarterly Economic Outlook Survey showed that 28 percent of CPAs serving in executive positions expressed optimism about the U.S. economy in the fourth quarter, up 7 percentage points from the 21 percent who were optimistic in the third quarter. Twenty-nine percent could be classified as pessimists, a decline of 11 percentage points from the prior quarter. Forty-three percent of the CPA executives who responded to the survey were neutral on the economy. A majority of 61 percent do not expect business conditions to return to prerecession levels until after 2012.

“What we’re seeing is that after a dramatic drop last quarter in optimism, we’ve regained some optimism in the past three months,” said AICPA vice president for business, industry and government Carol Scott. “Actually it’s a bounce of optimism tempered by some caution.”

The survey, conducted quarterly by the American Institute of CPAs and the University of North Carolina’s Kenan-Flagler Business School,  polled CFOs, CEOs and controllers who are AICPA members working in business and industry. The poll found that measures of optimism versus pessimism registered a combined 18 percentage-point swing toward a positive outlook for the U.S. economy, partially recovering from a 34-point plunge to the negative in the prior quarter, when pessimists outnumbered optimists by a two-to-one margin. Fifty-one percent of the survey respondents are now optimistic about the prospects for their own companies.

Despite that improvement, a majority of 74 percent expect their business to expand only a little or stay the same over the next 12 months.

Overall expectations for growth in revenue and profits, prices, costs and spending were stable from last quarter, with a slight majority of respondents continuing to expect increases across most categories. However, when compared with a year ago, significant improvement can be observed in the percentage of respondents who anticipate an increase in revenues.

Expectations for hiring remained flat, although there has been a slight uptick in hiring plans from a year ago. Thirty-four percent of respondents, the same as last quarter, said their companies would increase their headcount over the next 12 months, while 48 percent are planning to keep employee staffing levels the same, and 19 percent said they expect to reduce staff.

“Optimistic respondents cited growth in demand as primary reasons for their optimism, while the pessimists most often cited unemployment, government deficits, debt and regulations,” said Scott. “The midterm congressional elections were also frequently cited by those with increasing optimism. Hiring is one of the main things we are struggling with: the staffing levels. We can’t expect the big turn until people start hiring, and that is really lagging behind the optimism. Expectations for hiring continue to remain soft. They’re basically unchanged from last quarter.”

Forty-four percent of the survey respondents said their non-cyclical cash position was the same now as six months ago, and 42 percent said their organization’s liquidity position was about right.

Only 7 percent have seen large improvements in cash positions. Forty-seven percent plan to raise capital over the next six months.

Respondents from the technology, professional services, and retail trade and manufacturing industries were the most optimistic this quarter, at 69 percent for technology, 60 percent for professional services, and 57 percent for manufacturing and retail trade who were either optimistic or very optimistic about the outlook for their organizations. Respondents from the construction, real estate and health care industries were the least optimistic, at 35 percent, 41 percent and 34 percent respectively.

Customer demand, employee health care costs, regulatory requirements, access to capital and the cost of capital remain the top challenges that businesses face today. Availability of skilled personnel is also increasingly a concern.

Inflation is again a concern for 34 percent of the CPA executives’ businesses, up from 24 percent in the prior quarter, while fears of deflation waned to 14 percent. Forty-one percent of the respondents, however, said neither was a concern.

Regional differences in economic expectations appeared in the survey. Respondents from New England, the Mid-Atlantic and the Midwest appeared to be more optimistic than the South, Southwest and West Coast regions of the country.

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