CPA decision-makers turn negative about U.S. economy

CPA decision-makers turn negative about U.S. economy

Just 28% of CPA decision-makers in business and industry say they are optimistic about the U.S. economy for the next 12 months, and fewer than half are optimistic about their own companies.

That combination has produced the lowest level of business confidence in more than three years, according to a survey released Thursday by the AICPA.

Early in 2015, 68% of CPA executives were optimistic about the U.S. economy in the quarterly Business & Industry Economic Outlook Survey. But global turbulence and low oil and commodity prices are among the factors cited by the growing number of pessimists in the most recent survey. The dimmer outlook about the domestic economy has paralleled a drop, in five consecutive quarters, of the CPA Outlook Index (CPAOI), a composite measure of nine equally weighted indicators.

Each indicator dropped on a quarterly and annual basis: U.S. economic optimism, organization optimism, expansion plans, revenue, profits, employment, IT spending, other capital spending, and training and development. That led to an overall CPAOI reading of 63, down from 69 last quarter and down 11 points from last year. The last time the index was this low was when it hit 59 in the fourth quarter of 2012.

An index reading above 50 indicates a generally positive outlook.

The outlook on the U.S. economy was 47, down from 80 during the same period a year ago. That’s the lowest level recorded since 2012.

The decline in sentiment among CPA executives reflects several factors highlighted in minutes from the Jan. 26–27 meeting of the Federal Open Market Committee, which noted:

  • A decline in manufacturing output, including a decrease in the production of motor vehicles.
  • Projections of lower spending on nondefense equipment in the coming months.
  • A decline in the value of U.S. exports to the lowest level since early 2012.
  • Tightening of domestic financial conditions related to turmoil in China’s financial markets. This created an aversion to “risky assets” that was associated with a sharp decline in U.S. stocks. The S&P 500 dropped 12.3% between Dec. 1, 2015, and Feb. 12.
  • An oversupply of crude oil relative to demand, a problem that appears “unlikely to be resolved quickly, as was evidenced by a further downshift in oil futures prices.” Read more on the Journal of Accountancy.