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September 6, 2019

AICPA: Outlook for US economy dimming

Business executives hold their least optimistic view of the US economy in three years, in part due to trade concerns and fears of a sustained global slowdown, according to the third-quarter AICPA Economic Outlook Survey. The survey polls chief executive officers, chief financial officers, controllers and other certified public accountants in US companies who hold executive and senior management accounting roles.

Some 42% of survey takers expressed optimism about the US economy’s outlook over the next 12 months, down from 57%, the level it held for the past three quarters. Positive sentiment on the US economy had been as high as 79% in early 2018 and had not fallen below 50% since the third quarter of 2016, when it stood at 38%.

The global economy was viewed in an even worse light, with less than a quarter (24%) of executives expressing optimism, down from 35% last quarter. The survey was conducted during a period of intense uncertainty over US-China trade and tariff conflicts and the resolution of Brexit.

Some 45% of business executives said trade conflicts were to blame for some negative impact on their business over the past 12 months, with 16% saying it had a significant or moderate impact. And they expect things to get worse: 54% said they had an unfavourable view of global trade impacts on their business over the next 12 months, as compared to the past year.

Business executives are more positive about their own companies’ outlooks and expansion plans than the US and global economies in general, but these categories have also fallen to levels not seen since late 2016.

Availability of skilled personnel remains the top challenge for businesses, a position it has occupied since the third quarter of 2017. The number of survey takers who said their companies had too few employees dropped from 44% to 38% this quarter, while those who said they had too many employees ticked up slightly. Some 51% of respondents said their businesses had the right number of employees.

The CPA Outlook Index—a comprehensive gauge of executive sentiment within the AICPA survey— now stands at 72, down three points from last quarter. The index is a composite of nine, equally weighted survey measures set on a scale of 0 to 100, with 50 considered neutral and greater numbers signifying positive sentiment. All components of the index fell or were flat this quarter, with the biggest drop due to US economic sentiment.

Other key findings of the survey:

  • Profit and revenue growth expectations for the next 12 months were 2.8% and 4.2%, respectively. Both numbers were down 1.5 percentage points from a year ago and represented their lowest level since the third quarter of 2016.
  • The percentage of US executives who expressed optimism about their own company’s prospects over the next 12 months fell from 62% to 58%, quarter over quarter.
  • Survey respondents who said they expect their organizations to expand in the coming year also fell two percentage points to 61%.
  • Domestic economic conditions and domestic political leadership joined availability of skilled personnel as the top three business challenges this quarter.

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