AICPA Business And Industry Economic Outlook Survey

The AICPA recently released the results of its semi-annual survey of CPA decisionmakers on economic trends. The survey targets CEOs, CFOs, Controllers, and other officers or decisionmakers in business, government, and nonprofit organizations. About 65 percent of the respondents are in private companies, 16 percent in U.S. public companies, 4 percent in foreign public companies, and the remaining 15 percent in government, education, nonprofit, or other organizations.

The survey shows some reduced optimism about the economic outlook generally. Although a majority (57%) of those surved in June 2005 continued to be “optimistic” or “very optimistic” about the future, that is down substantially from the 71% holding those views in December 2004 and 74% the previous year. The vast majority of these former optimists did not become pessimistic, however, they merely migrated to the neutral category, which was up to 33% from 21% in December. The “pessimistic” and “very pessimistic” groups only gained one percent each, respectively, bringing their total to 10%.

When asked about their own companies, however, the results look quite different. A total of 74% are optimistic or very optimistic, which is one point higher than the results from December and about the same as one year ago. The pessimistic groups stayed about the same, and the neutrals declined a couple of points. Thus, optimism about one’s own organization continues to be the norm. Growth expectations also remained stable, with about 62-64 percent in the “increase substantially or moderately” categories, about ¼ with minimal change, and only 11-12 percent expecting decreases.

I put more stock into the assessment of one’s own company than the economy generally. The assessment of one’s particular circumstances is likely to be based on more current and precise information, which is not filtered through mass media sources. Moreover, we all have a heightened self-interest in minding our own stores, so to speak. Nevertheless, the fact that a solid majority remained on the optimistic side should be viewed as positive.

Another interesting point. A majority of respondents indicated that their companies planned increased spending. The leading category appeared to be IT, which had about 43 percent predicting this category to “increase moderately”, and 10 ten percent predicting it would “increase substantially”. The conventional wisdom is that there has been a lull in spending in this area which may now be awakening. Our own university is spending considerably on IT infrastructure, and perhaps other businesses with key information needs are moving toward greater technological gains. Significantly, only a handful of companies were planning to decrease spending in any category. (Identifying companies that may serve this market could lead to stock market sector gains.)

I’ll touch on one other point from this survey – employment – tomorrow.

EAM