"The outlook is overwhelmingly pessimistic," said Arleen Thomas, AICPA senior vice president for member competency and development. "Most CPAs working in business and industry don't expect any improvement in the U.S. economy before the second half of 2009 or the first half of 2010."
Pessimists outnumbered optimists by 16 to 1 in the results of the fourth quarter AICPA/UNC Kenan-Flagler Business and Industry Economic Outlook Survey. Eighty-two percent of respondents indicated they were pessimistic or very pessimistic, up from 62 percent in the third quarter. In the latest survey, 18 percent of respondents said that they were "very pessimistic," three times the number who felt that way three months ago.
UNC Kenan-Flagler Accounting Professor Mark Lang, PhD, pointed to the negative assessment by many respondents for their own organizations. "Up to now, respondents have generally been pessimistic about the economy as a whole but relatively optimistic about their own companies," Lang said. "More respondents now anticipate decreases in revenues, profits and reduced hiring for their own organizations."
Forty-five percent of respondents now expect their companies to contract, while 31 percent of respondents still expect some expansion in the next twelve months.
Primary drivers of the increased pessimism are the credit crisis and increasing unemployment. The financial executive CPAs cited declines in consumer spending and consumer confidence along with increasing economic instability and uncertainty as causes for pessimism. Respondents were divided about the impact of the presidential election and Washington bailouts.
Financial executive CPAs see little prospect for near-term improvements. Only 9 percent expect the economy to begin to improve before the second half of 2009. Forty-two percent expect improvement in the second half of 2009, and 49 percent see no improvement at all until 2010 or later.
"CPA decision-makers correctly called the recession in the third quarter survey," Thomas said. "CPAs are trained to be objective and analytical and are not prone to hype and emotion, so when they foresee our economic problems extending well into 2009 and beyond, it is a troubling forecast."
The survey shows companies are increasingly taking actions to respond to deteriorating economic conditions. So far, the top actions taken or contemplated by companies are capital spending cuts, hiring freezes, layoffs and travel restrictions.
"The drop in optimism is affecting planned investment on research and development, information technology and other capital improvements," Lang said. "As firms cut their own expenditures in anticipation of reduced demand for their products, it will become a self-fulfilling prophecy rippling through the economy."
