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AICPA Outlook index, an unpleasant surprise or a good sign?

Optimism among US certified public accountant (CPA) business leaders has slowed for the first time in two years, according to findings published last week by the American Institute of Chartered Public Accountants (AICPA), dividing opinions in the industry as to whether the results are a cause for concern.

The CPA Outlook Index (CPAOI), gathered through a survey on business expectations conducted quarterly by the AICPA amongst its members. The latest findings shown to have fallen four points in the first quarter of 2015 to 74, compared to the final quarter of 2014, marking the first decrease in confidence since the end of 2012.

The index combines nine equally weighted measures graded on a scale of 0 to 100. A two point increase in optimism about the US economy was offset by a decline in all other categories, including expectations surrounding profits, employment, revenues and organisation optimism.

However, despite marking a decrease on the most recent previous figures from December, year on year the survey showed a 15 point increase, with most entries eliciting a growth in positivity compared to this time last year.
AICPA business, industry executive committee chair Valerie Rainey told The Accountant (TA) the findings were, at least in part, unexpected.

"We were surprised by the less enthusiastic organization optimism, expansion, hiring and spending plans, in the context of more optimism about the US economy," she explained.

Although it is difficult to draw a definite conclusion from the findings, Rainey warned they might be cause for caution.
"Over the next few quarters we will be able to assess whether the less optimistic sentiment is a blip or the beginning of a trend," she concluded, adding: "I would expect that the optimism about the US economy will ease off and be more in line with the other figures."

Keep calm and carry on
Speaking to TA, WeiserMazars partner Kathryn Byrne said she is not surprised by the figures, conversely, as they resonate with her experience over the past few months.

"I found the results very much on par with what my clients are actually doing," she explained, adding that although there has been a decline in optimism, it should not be too great a cause for concern for the industry.

"It's still optimistic; it's still high, just not as high as we were last quarter," she explained, adding that she believes the first quarter is seeing a readjustment back to previous, more tempered levels.

In general, the outlook on the economy as a whole is optimistic, she explained: "I don't think we're where we were two years ago, people think the economy is turning."

Rather than signalling a lack of belief in the US's ongoing recovery, the slow in spending intentions is more to do with a widespread propensity for caution, a legacy of the recession, according to Byrne.

"I think after the last recession people are a bit more cautious about what they're doing," she explained. "People still remember what happened a few years ago and they are going to be cautious until they get further away from that reminder."

In the future, she added: "When it comes to spending, I think they will spend, but I think they will take longer to really think about that spend."

This caution could turn out to be a positive new feature on the US's economic landscape over the coming years, according to Byrne.

"I think it's a good caution," she explained. "It's good for companies to think about the spends, think about the employment, expansions plans, those are some significant resources that are needed, I think it is prudent to spend a little longer thinking about those decisions."

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