Manufacturing boosts optimism in latest AICPA-UNC survey

Expectations among Certified Public Accountant executives for the U.S. economy remained pessimistic in the first quarter as the recovery proved sluggish amid signs of potential growth in manufacturing and a slightly improving outlook for organizations, according to a new nationwide survey conducted by the American Institute of Certified Public Accountants and the University of North Carolina's Kenan-Flagler Business School.

"It is good to see signs of optimism, especially from the manufacturing sector," said Carol Scott, CPA, AICPA vice president for business, industry and government. "Unfortunately 40 percent of our CPA members in business and industry – chief financial officers, controllers and CPA financial professionals – are now telling us that they do not expect their business to return to pre-recession levels until 2012 and beyond."

Thirty-eight percent of CPA executives expressed pessimism about the economy, a slight decrease from 40 percent in October, while 25 percent were optimistic. One third of respondents, 36 percent, believe that conditions will not return to pre-recession levels until after 2012, according to the latest survey conducted Jan. 27 to Feb. 15. Thirty-five percent said conditions would return to pre-recession levels in 2011, and 23 percent said things would return during 2012. Only 4 percent thought conditions would snap back to pre-recession levels this year.

"This quarter's results continue a promising trend," said UNC Kenan-Flagler Accounting Professor Mark Lang, Ph.D. "Optimism among CPA financial executives about sales and profit growth are improving, and spending plans are beginning to follow suit. The only missing piece is employment growth, which is starting to pick up but continues to lag. Many companies are understaffed, but are waiting for more certainty before they hire."

The AICPA/UNC Kenan-Flagler Economic Outlook Survey introduced two new indices, the Corporate Expansion Index (CEI) and Corporate Optimism Index (COI), in the fourth quarter of 2009. The two indices consolidate expectation and optimism trends for the economy and for respondents' own organizations. Both indices were positive in this quarter. The CEI continued the upward trend it began in April 2009 and the COI rose slightly after moving sidewise since July 2009.

Outlooks for respondents' own organizations improved this quarter. Overall, 44 percent said they were optimistic about their organizations this quarter, a six-percentage-point jump from 38 percent in late 2009. At the same time, 24 percent were pessimistic about their own organizations, an improvement over 30 percent who had been negative about the prospects for their organization in the fourth quarter.

CPAs working for organizations in the manufacturing sector led the increase in optimism with the percentage of optimists jumping to 56 percent this quarter, up from 39 percent last quarter.

The improvement in organizational optimism hasn't yet translated into an improved jobs outlook, according to the survey. "The employment situation continues to be problematic," Scott said. "Less than one third of our members' companies are planning to increase their number of employees and we still have 27 percent telling us they are planning to reduce their headcount in the next 12 months."