Heightened optimism among CPA financial executives seems to indicate the worst of the recession is in the past, but the consensus is growing that the U.S. economy is still a ways off from achieving a full recovery. While optimism about the economy continued to improve and spread across most industries in the third quarter, the percentage of executives who don’t see a recovery beginning until at least the second half of 2010 increased substantially (27% vs. 43%) from the previous quarter.
When asked about the economic outlook for their own organizations, optimists outnumbered pessimists for the first time since the third quarter of 2008, according to results from the AICPA/UNC Kenan-Flagler Business School Business & Industry Economic Outlook Survey Q3 2009. About 38% of respondents were optimistic or very optimistic about the economic prospects for their organization over the next 12 months, while 29% were very pessimistic or pessimistic. Thirty-three percent were neutral. Respondents also were more optimistic about their own organizations than about the U.S. economy as a whole (38% vs. 26%), continuing the trend seen over the past two years.
Although optimism was more widespread than in previous surveys, it was not evenly distributed across all industries. Respondents from professional services and technology organizations see a brighter outlook for the upcoming year, with 49% and 61%, respectively, reporting they’re optimistic, compared with their colleagues in real estate and construction, who were 29% and 28% optimistic, respectively.
“We saw very substantial optimism in technology, but even more so, and we saw professional services also being really quite optimistic. But the degree of optimism extended all the way down into retail, wholesale and manufacturing to some extent, and so it seemed as though the green shoots were spreading across a wide range of industries,” said Mark H. Lang, CPA, a Kenan-Flagler accounting professor.
Executives continued to push back the projected timing for improvements in their own organizations. Twenty-four percent of respondents said they expect the prospects for their organizations to improve in the first half of 2010 (down from 27% in the second quarter), 23% in the second half of 2010 (up from 18% in the second quarter) and 14% in 2011 or beyond (up from 8% in the second quarter).
Layoffs, however, were third on the list of actions implemented in response to the crisis. Fifty-six percent of respondents had implemented compensation freezes, the most-cited measure, followed by capital spending cuts (52%) and layoffs (48%). This quarter’s survey also asked respondents about measures they plan to implement in the future. Eleven percent of respondents indicated they still expect to lay off employees; 10% expected further capital spending cuts and compensation freezes.
The survey, conducted between July 22 and Aug. 10, includes responses from 1,093 CPAs in business and industry. Sixty-three percent were CFOs, 27% were controllers, and 5% were CEOs or COOs. Sixty-nine percent of respondents work for or work in privately owned entities, 12% for public companies, 13% for government, education and associations, and 5% for foreign-owned companies. Detailed survey results are available at fmcenter.aicpa.org.
To view the economic outlook dashboard for the third quarter, click here.
Megan Pinkston is the JofA’s online editor. Her e-mail address is email@example.com.