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In the News: CPAs' Optimism on U.S. Economy Increases, Despite Sequester

Sequester ChartConfession time: I am not a Nobel Prize-winning economist. In fact, I dropped Microeconomics my freshman year in college after one class and I never looked back. So when I read that the Dow hit an all-time high this week I wasn’t sure what to think about how the sequester would impact businesses and the economy overall. And since I like to understand what’s going on, all of this confusion made me sad.

Luckily for me, the AICPA just released the results of our Q1 Economic Outlook Survey, which polls members who serve as CEOs, CFOs and controllers as well as other CPAs in U.S. companies who hold executive positions on their views on the economy moving forward.  And this quarter, the ‘survey within a survey’ focused specifically on the potential impact of the sequester on their companies’ business.

As Ruth Mantell reports in MarketWatch, according to the survey results, only 11 percent of the CPAs surveyed believe the massive spending cuts in the sequester will have a “significant” impact on their companies’ business. Thirty percent responded that there would be a “slight” impact from the sequester, with an additional 30 percent reporting that the impact on their business would be “minimal.”

I found it somewhat interesting that, amidst all of the pundits telling us that the sky is falling as a results of the sequester, a plurality of those surveyed (47 percent) said they favored the sequestration cuts taking effect as scheduled. Another 38 percent said they wanted a mix of tax increases and spending cuts to forestall sequestration. Some 15 percent wanted the sequestered cuts to be delayed until the economy rebounds.

David Hall, covering the survey results in the Wall Street Journal’s CFO Journal, noted that there was somewhat more hope for the economy than in other surveys, largely attributed to the relief from averting the fiscal cliff.

CPAOIOptimism increased in the CPA Outlook Index, a comprehensive gauge of executive sentiment within the survey, which rose seven points to 66 for the quarter. While that reflects the largest quarterly jump in more than two years, it is important to note that the index is still below its post-recession high of 69, last reached a year ago. The biggest lift in the index this quarter comes from optimism on the U.S. economy (+14 points quarter-over-quarter from 36 to 50), which represents a significant shift from negative to neutral sentiment. In fact, all components of the CPA Outlook Index rose this quarter, a stark contrast to the previous quarter, when each element fell.

 “Corporate executives are still concerned about unemployment levels, deficit and debt issues, and political gridlock,” said Arleen R. Thomas, CPA, CGMA, the AICPA’s senior vice president for management accounting and global markets. “But a solid majority of survey takers now expect to see their business expand in the coming year, and we’re seeing a slight uptick in hiring plans.”

 Other findings of the survey include:

  • Key Performance Indicators – After a progressively downward slide through 2012, expectations for revenue, profits and headcount growth rebounded in the first quarter of 2013. 
  • Hiring – Some 54 percent of business executives say their companies have the right number of employees. Twelve percent said they plan to hire soon, up from 8 percent in the past quarter.
  • Top Challenges – “Employee and benefit cost concerns” has replaced “Domestic political leadership” as the No. 3 concern from the past quarter. The top three concerns now are: 1) Domestic economic conditions, 2) Regulatory requirements/changes and 3) Employee and benefit cost concerns.

What are the top challenges you expect your company or business to face in the coming year? Please feel free to share the issues you are facing in the economy in the comment section.

, AICPA Staff.

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