A steadier outlook for the US economy
Optimism about the US economy, which soured in the first quarter, rebounded in the most recent survey of CPA executives in business and industry.
Projections for revenue, profit, and expansion plans, down slightly year over year, are higher compared with the previous quarterly survey. The latest figures were released Thursday by the American Institute of CPAs.
CPA decision-makers in the US are less optimistic about the global economy than the domestic economy for the next 12 months: 18% are optimistic, and 32% are pessimistic. The rest, about half of respondents, are neutral – in line with sentiment of a year ago, but much more positive when compared with the previous quarter. Earlier in 2016, 52% were pessimistic about the global economy.
US finance executives are more optimistic about their own companies than about the domestic economy, though that sentiment about their business is lower than a year ago.
Eight of the nine equally weighted indicators in the CPA Outlook Index (CPAOI) rose on a quarterly basis; only training and development remained steady. All nine are down compared with spring 2015. The composite CPAOI, at 68, rose for the first time after five consecutive quarterly declines. An index reading above 50 indicates a generally positive outlook.
CPA Outlook Index Component Indicators
Regulatory requirements and changes, often the top challenge listed in the survey, returned to the top spot this quarter after falling behind domestic economic conditions in the first quarter. Availability of skilled personnel was behind regulation and the domestic economy on the list of challenges. Employee costs and benefits, second on the challenges list in the second and third quarter of 2015, is fifth on this quarter's list.
Key performance indicators
Expected growth in revenue and profit had fallen five consecutive quarters before this survey. For revenue, the projected 3.0% growth for the next 12 months is sharply up from the projection of 1.7% in the previous quarter and in line with the 3.2% projection from the previous year. Profit is projected to rise 1.5% in the next 12 months, compared with 0.7% the previous quarter and 2.4% the previous year.
Staffing is projected to rise 1.1%, compared with 0.5% in the first quarter, the lowest reading in the survey since the fourth quarter of 2012. Training, IT, and other capital spending is projected to rise at a lower percentage than a year ago but a higher one than the previous quarter.
Thirty-seven per cent of companies say they don't have enough employees, up from 35% a year ago and 31% a quarter ago. Of companies with too few employees, a larger percentage were planning to hire a year ago compared with this quarter. Almost half (49%) say they have approximately the right number of workers, down from 55% in the second quarter of 2015.
—Neil Amato (email@example.com) is a CGMA Magazine senior editor.
The top ten challenges
Finance executives picked the following as top challenges facing their organisations in the second quarter:
1. Regulatory requirements/changes
2. Domestic economic conditions
3. Availability of skilled personnel
4. Domestic competition
5. Employee and benefits costs
6. Stagnant/declining markets
7. Domestic political leadership
8. Developing new products/services/markets
10. Energy costs