Pessimism for U.S. Economy Deepens

Laura Joszt

Perhaps it's the fiscal cliff and the seemingly stalled talks between Democrats and Republicans, but business executives have a poor outlook for the U.S. economy, according to a new survey.

Perhaps it’s the fiscal cliff and the seemingly stalled talks between Democrats and Republicans, but business executives have a poor outlook for the U.S. economy, according to a new survey.

The American Institute of CPAs’ (AICPA) Economic Outlook Survey polls chief executive officers, chief financial officers, controllers and certified public accountants. The survey revealed that pessimism has steadily deepened over the last three quarters.

“While most executives are still projecting modest growth for their businesses, the trends for hiring plans suggest retrenchment rather than recovery,” said Arleen R. Thomas, CPA, CGMA, the AICPA’s Senior Vice President, Management Accounting & Global Markets. “Only 8% of firms have immediate plans to hire, and the number of businesses that say they have too many workers is on an upswing.”

Expectations for revenue, profits and headcount growth are at their lowest since third quarter of 2010.

Every major measure of economic expectations in the survey fell both quarter over quarter and year over year. The index had started the year strong, matching the post-recession high, but it has fallen since then.

The outlook index is scaled from 0 to 100, with 50 considered neutral. The greater the number the more positive sentiment is. However, right now, sentiment is only at 59 for the fourth quarter in 2012.

The top two challenges remained the same throughout the entire year: 1) domestic economic conditions and 2) regulatory requirements/changes. Over the year domestic political leadership crept up from the fifth most named challenge to number three over the last two quarters. And respondents are not hopeful that much will change in Washington with 74% saying that the highly charged political environment will not change for the better next year.

The nine components used to find the overall outlook sentiment are: U.S. economic optimism; organization optimism; expansion plans; revenue; profits; employment; IT spending; other capital spending; and training and development. All of these components were down by at least three points from the previous quarter. The sentiment for profits and employment were down by as much as seven points over the previous year.