CPA financial executives in industry offered little encouragement to those hoping for a quick recovery from the current recession in the quarterly Business and Industry Economic Outlook Survey released Wednesday and conducted by the AICPA and the University of North Carolina’s Kenan-Flagler Business School.
A full 75% of respondents said their outlook in the first quarter had become “much less confident” or “slightly less confident” since the previous quarter.
Adding to the pessimism was the fact that respondents now expect it to take longer for the U.S. economy to begin to improve. In the fourth quarter of 2008, 51% of respondents expected the economy to improve by 2010; now only 32% feel that way with 41% expecting improvement to begin in the first half of 2010 and 8% not expecting recovery to begin until 2011.
Employment prospects also continued to drop. Less than half (47%) of respondents expected to maintain or increase their employee head counts. In the previous quarter 57% expected to do so. Nearly a third (32%) expected to reduce staffing by more than 5%. Technology and health care providers showed the best employment prospects with just under one-third expecting to increase the number of employees; but even for those industries the number of respondents expecting decreases exceeded the number expecting increases.
Companies have continued to respond to economic conditions by cutting costs. This quarter showed a significant increase in the number of organizations that have implemented or are planning layoffs, compensation freezes and hiring freezes. Compensation freezes have now replaced capital spending cuts as the top action.
The percentage of respondents expecting revenue decreases (60%) is now twice the percentage expecting revenue increases (29%). Expectations for profit decreases are similar with 60% expecting decreases and only 26% expecting increases.
Overall, the outlook for the U.S. economy over the next 12 months was virtually unchanged from the previous quarter with 83% of participants responding that their outlook was “pessimistic” or “very pessimistic.” Nearly 21% of those described themselves as “very pessimistic.”
Although respondents were still slightly more optimistic about their own organizations than about the U.S. economy, the gap between the two shrank. And unlike past quarters, not one of the industries analyzed (only those with more than 50 respondents are analyzed) had more optimistic than pessimistic respondents. However it should be noted that despite the grim overall outlook, about one-quarter of respondents still expected increases in revenue, profit and employees.
The survey participants were 1,183 CPAs employed as financial executives in industry. Sixty percent were CFOs, 26% were controllers and 5% were CEOs or COOs. Responses were collected between Jan. 28 and Feb. 12. Sixty-four percent of respondents came from privately owned entities, 16% from public companies, 13% from government, education and not-for-profits and 6% from foreign-owned companies.
Click here to view the full results of the survey.