Survey of CPAs Shows Economic Pessimism Still Prevalent, But Shrinking

Pessimism about the U.S. economy among CPA decision makers has shrunk slightly, but remains high, according to the AICPA Economic Outlook Survey for the fourth quarter of 2011.

Forty percent of the 916 qualified respondents in the survey said they were somewhat or very pessimistic about the economy. That was down from 59% in the third quarter.

The idea that pessimism continued to be strong but is decreasing is reflected in predictions of a double-dip recession in the poll, which faded a bit from the previous quarter. Sixty-one percent of CPA decision makers in the third quarter deemed another recession somewhat or very likely; that number fell to 45% in the fourth quarter. Fifty-three percent now consider a double-dip recession unlikely or very unlikely.

Those identifying themselves as somewhat or very optimistic about the economy more than doubled from 9% in the third quarter to 19% in the fourth quarter. But that number still trails the fourth quarter of 2010, when 28% of CPA decision makers were somewhat or very optimistic.

In the first quarter of 2011, 48% of CPA decision makers were somewhat or very optimistic.

The CPA Outlook Index, a broad-based indicator of the strength of U.S. business activity and economic direction, increased six points to 64 in the fourth quarter after measuring 58 in the third quarter, following an eight-point drop from Q2 to Q3 2011.

CPAs remained more optimistic about the condition of their own organizations than the economy as a whole. Forty-five percent consider themselves somewhat or very optimistic about their own organizations, up four points from the third quarter and 26 points higher than the percentage who are optimistic about the economy.

In the fourth quarter of 2010, 51% considered themselves optimistic about their own organization.

Fifty-nine percent of CPA executives expect their organizations to expand at least somewhat in the next 12 months. That’s up six points from the third-quarter forecast and similar to the fourth quarter of 2010, when 58% predicted expansion.

CPA executives said they expect revenue to grow an average of 2.8% in the next 12 months. That’s up from 2.4% in the third quarter and 2.4% from the fourth quarter of 2010, but trails the 3.7% number from the first quarter of 2011.

Plans for spending might be the most positive indicator in the survey. Forecasts for spending increases on IT, other capital and training reached their highest level since the third quarter of 2007. CPAs project increases of 2.7% on IT, 2.2% on other capital expenditures and 1.2% on training. Projections for marketing spending increases are up 1.8%.

Despite those predictions of expansion and increased revenue, the hiring forecast of CPA decision makers remains grim. Just 10% of respondents, the same as last quarter, indicated that their organizations plan to hire in the near term. Fifty-seven percent said they have the right number of employees. Twenty-five percent currently said they have too few employees, but are reluctant to hire.

Half of the respondents said it will take at least 12 months before staffing returns to pre-recession levels, and 32% said staffing will not return to pre-recession levels in the foreseeable future.

Domestic economic conditions topped the list of challenges for organizations this quarter and also ranked first  among CPA decision makers in this quarter’s survey within a survey, which asked respondents to choose their most significant source of uncertainty. U.S. economic conditions were cited by 43% as their top concern; regulatory policy uncertainty (13%) and White House leadership (11%) ranked a distant second and third.

The survey was conducted from Nov. 9-28.

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