Accounting pessimism

U.S. accountants are less optimistic about the direction of the U.S. economy than they were in the first quarter of 2011.

According to the latest AICPA Economic Outlook Survey, chief financial officers, controllers and CPAs in executive and senior management accounting roles say they are concerned that rising costs may end recent economic momentum.

The CPA Outlook Index, a broad-based composite index that captures the expectations of CPA financial executives and management accountants, declined three points to 66 this quarter, from 69 in the prior period.

"The flush of optimism we experienced earlier this year has given way to more moderate expectations for the U.S. economy," Carol Scott, AICPA vice president for business, industry and government, said in a statement. "While the CPA Outlook Index is still positive relative to the dark days of the recession, our members are concerned about rising energy costs and inflation, health care costs and continuing weakness in demand."

The second quarter AICPA Business and Industry Economic Outlook Survey was conducted May 11-26 and included 1,093 qualified responses from CPAs who hold leadership positions, such as chief financial officers or controllers in their companies. The overall margin of error is less than plus-or-minus 3%.

OTHER FINDINGS
• The survey shows that expectations for corporate expansion and hiring have moderated and the outlook for revenues and profits declined. Concerns about inflation continued to rise, driven by higher energy costs. The outlook for capital spending remained largely flat with information technology the only sector enjoying improvement.

• Only 12% of companies have current hiring plans, roughly even with 13% three months earlier. 21% said they have too few employees but are hesitant to hire new workers. A majority do not expect to see a return to pre-recession employment levels anytime soon.

• Only 33% of CPAs serving in executive positions expressed optimism about the U.S. economy in the second quarter, down from the 48% who were optimistic in the first quarter. Pessimism increased to 27%, up from the 18 percent in the prior period, reflecting an upswing in negative mood.

• Concerns about inflation continue to mount among CPA financial executives and management accountants with 61% citing inflation as a concern over the next six months, up from 55% of respondents concerned about inflation in the prior quarter. 32% of respondents indicated concern about rising material costs, while 24% are concerned with increasing energy prices.

• Survey respondents say they continue to struggle with rising health care costs and many employers are planning to require employees to contribute more to cover the cost of health care benefits in the coming year. 40% plan to increase copays, coinsurance and/or deductibles. 31% plan to modify/restructure offerings. Only 24% plan to absorb all cost increases.