Recent problems in the subprime-mortgage and credit markets have left certified public accountants serving as senior executives feeling gloomy about the economy, according to a new survey by the American Institute of Certified Public Accountants.
Fourth-quarter results fell to their lowest levels in three years, as just 30 percent of 1,171 CPAs queried said they felt optimistic about America’s economy over the next year. The fall-off was sharp compared with the AICPA’s July Business and Industry Outlook Survey, in which 47 percent were optimistic about the economy. In even starker contrast, the AICPA’s 2004 survey found that 75 percent of CPA executives were optimistic.
“This is the first time since we launched the Economic Outlook survey three years ago that so many CPAs in business and industry have expressed this level of anxiety about the state of the U.S. economy,” John Morrow, AICPA vice president for business, industry, and government, said in a statement.
They survey also found that pessimism is on the rise. Those holding negative views of the economy grew from 15 percent in the last quarter to 26 percent this quarter. Most CPAs attributed their feelings to subprime-mortgage losses; a weak housing market; tightening credit conditions; the declining dollar; and rising oil, gas, and health-care costs, the survey found.
On the bright side, CPAs are still feeling pretty good about their own organizations. The AICPA found that 60 percent reported growth in revenues and profits at their firms, just a 5 percent drop from the previous quarter. On the other hand, 48 percent did not expect to add employees during the next year, and 18 percent expected layoffs.
Despite their glumness, the AICPA results were more hopeful than the findings of the Duke University/CFO magazine Business Outlook Survey published in October. That survey found that a record 62 percent of the 1,316 finance chiefs polled felt more pessimistic about the economy than last quarter. Ongoing worries about consumer demand and the cost of labor, combined with new concerns about credit-market turmoil, prompted pessimistic respondents to outnumber optimists four to one.
As for optimism, just 14 percent of the Duke University/CFO magazine survey respondents were feeling better about the economy than they were last quarter, while 25 percent said their views were unchanged.
The dim outlook also appears to be catching on globally. The latest poll of 1,300 senior finance executives conducted by CFO Europe magazine in conjunction with RSM Erasmus University in the Netherlands and Duke found that in Europe, only 26 percent of CFOs said they are more optimistic about the regional economy than during the previous quarter. That is a sharp decline from 41 percent last quarter and one of the largest quarter-on-quarter drops in the survey’s history. Economic confidence is now at a two-year low, having set a two-year high only six months ago.
Similar to the AICPA survey findings, the CFO Europe study found that senior finance executives were more upbeat about the prospects for their own companies, with 46 percent more optimistic about the year ahead, up from 44 percent in the previous quarter. In fact, finance chiefs upgraded their earnings projections in the latest poll, forecasting a rise of 11 percent for the coming year, compared with 9 percent three months ago.
But CFOs in Europe are keeping a close watch over the possibility that problems in America’s economy will spread elsewhere. More than 40 percent of finance chiefs in Europe say they are already feeling the effects of the credit turmoil.