Pessimism grows

Expectations for the United States economy turned sharply negative on concerns about unemployment and a tight credit market, as pessimists outweighed optimists by a two-to-one margin among CPAs serving as C-suite executives, according to the American Institute of Certified Public Accountants and the University of North Carolina’s Kenan-Flagler Business School’s latest Quarterly Economic Outlook Survey.

Measures of optimism versus pessimism registered a combined 34 percentage-point swing toward a negative outlook, reversing the 28 percentage-point shift towards optimism recorded in the prior quarter when optimists outnumbered pessimists for the first time in two years.

The survey was conducted via an online questionnaire from July 21 through Aug. 5 and included 1,584 qualified responses from CPAs who hold leadership positions, such as chief financial officers or controllers in their companies. The overall margin of error was less than plus-or-minus 3 percentage points.

"Our survey signals the nascent economic recovery that buoyed expectations last quarter is stalling," AICPA Vice President for Business, Industry and Government Carol Scott said in a statement. "Despite a decrease in confidence, CPAs serving in top finance and executive positions in business and industry are substantially more optimistic about their own organizations than they are about the broader U.S. economy. Companies that weathered the downturn have restructured, improved productivity and are poised for growth when business conditions such as customer demand, employment and credit rebound."

SURVEY FINDINGS
• Only 21% of the survey respondents expressed optimism about economic recovery, a sharp decrease from 40% who were optimistic in May and the lowest level since April 2009.

• 40% were pessimistic about the economy, up from 25% in the last quarter.

• 78% of respondents believe U.S. business conditions will not return to pre-recession levels until 2012 or later, and 17% said conditions would return to pre-recession levels in 2011, and less than 1% said activity would rebound this year.

• 24% expressed more confidence about the prospects for their own organizations, a decrease from 40% who had more confidence in May.

• CPAs who are pessimistic about their own organizations rose slightly to 21% from 20% in the prior quarter. Also, 54% expect their business to expand in the next 12 months.

• As U.S. unemployment holds steady at 9.5%, 55% of survey respondents do not anticipate their organizations’ employment levels returning to pre-recession levels in the next year, compared with 7% who anticipate staffing levels returning to normal in the next year.

• Less than one in 10, 9%, reported that their organizations were planning to hire in the immediate future.

• As pessimism returned, fears of inflation have dropped substantially, with 24% citing concerns over inflation impacting their business in the next six months, compared to 42% who expressed concern in the last quarter. Also, 20% are now concerned their organizations will be impacted by deflation in the next six months.