CPAs who are business executives are forecasting an increase in corporate expansions in the year ahead, according to a new survey by the American Institute of CPAs.
The AICPA’s third quarter Economic Outlook Survey indicates the highest level of business expansion predicted since early last year. The survey polls CEOs, CFOs, controllers and other CPAs who have executive and senior management jobs at U.S. companies.
The survey respondents anticipate profits to rise 2.6 percent over the next 12 months, more than triple the 0.7 percent rate they predicted at the beginning of this year. Seventy percent of the executives polled expect revenue at their companies to increase in the year ahead, two percentage points higher than in the second quarter of this year and seven percentage points more than in the first quarter.
In addition, 62 percent of the respondents anticipate their businesses will expand in the next 12 months, the highest rate since the first quarter of last year. The biggest companies—those with more than a billion dollars in revenue—indicated the largest shift in sentiment, with two-thirds now anticipating growth, up from 50 percent in the second quarter.
However, those companies appear to be the least likely to indicate they need new employees and are looking to hire immediately (10 percent compared to 21 percent for all companies).
“We’re seeing some stability in optimism about the U.S. economy after a few volatile quarters,” said AICPA senior vice president of management accounting and global markets Arleen R. Thomas in a statement. “The response by businesses has been variable, though, depending on the size of the company and the industry it’s in. Some are ready to add new staff and make other investments, while others are taking a more cautious stance.”
The presidential election is affecting the respondents’ business planning, budgeting and forecasting. Seventy percent of the business executives polled said the election was at least a slight factor, compared to 64 percent who were asked the same question in the first quarter. A 79 percent majority of executives said the election is either not a factor in their hiring decisions or they intend to continue to hire at their current rate. In addition, 81 percent of the survey respondents said the election either was not a factor in capital expenditures and business expansion decisions or they planned to spend at their current pace in those areas.
The proportion of executives who said they are optimistic about the U.S. economy rose one percentage point to 38 percent during the third quarter. A year ago, the rate stood at 48 percent. Optimism about executives’ own organizations remained stable at 53 percent, the same percentage as the previous quarter and a year ago.
Headcount growth for the coming year is anticipated to be 1.3 percent, an increase from 1.1 percent last quarter. The technology industry is expected to be the hottest sector, with 4.4 percent staffing growth. Not-for-profit and banking ranked below it, with an expected growth rate of 0.4 percent, a decline of at least one percentage point for both industries since last quarter.
The top seven challenges for businesses, led by “regulatory requirements and changes,” stayed the same as in the prior quarter. The poll found 92 percent of business executives anticipate an increase in health care costs in the year ahead, compared to 90 percent last quarter. Survey respondents predict health care spending will increase an average of 5.6 percent in the coming year, a one-tenth of a percentage point drop from last quarter.
The CPA Outlook Index—a comprehensive gauge of executive sentiment within the AICPA survey— rose one point in the third quarter to 69, but is well below its post-recession high of 78, which it reached in the fourth quarter of 2014.
[IMGCAP(1)]
