Certified public accountants surveyed in the United States after the Presidential election in November have serious doubts about the ability of Congress to resolve the fiscal cliff and have a dim view of U.S. economic prospects for 2013.
The results of the economic outlook survey of the American Institute of Certified Public Accountants (AICPA), released Thursday, showed that 74% of the more than 1,668 CPAs surveyed do not expect the current “highly charged” political environment to change for the better in 2013.
“People are starting to feel this political stalemate out there,” says Jim Morrison, CFO of chemicals-compounding firm Teknor Apex and chair of the AICPA’s Business & Industry Executive Committee. “It’s starting to impact the psyche at the organization level.”
Survey respondents cited the fiscal cliff of expiring tax cuts and government spending pullback as one of the key reasons for their souring outlook.
The survey’s main economic indicator, the AICPA’s CPA Outlook Index, a measure of CPAs’ views in nine areas of the economy, slipped to 59 in the fourth quarter, down four points. Typically a reading above 50 in the overall index denotes a positive outlook for the economy, but the index has moved downward three quarters in a row after starting the year at 69. The profits “sub index” fell the most, to 60 from a level of 66 in the third quarter.
The CFOs, CEOs, and other senior executives surveyed believe that even if the U.S. government came to some solutions to ward off the fiscal cliff’s impact before year-end, there are so many moving parts that it would take a long time for the negative economic sentiment to reverse. “There still [would be] a very cautious mood out there,” Morrison says. As to the solutions Congress comes up with, CPAs surveyed favor spending cuts over revenue increases to address the federal deficit and debt problems. More than two-thirds indicate comprehensive tax reform is unlikely or highly unlikely.
So what’s the takeaway for other CFOs? “I think the war cry is hold on to your cash,” says Morrison. “This is the third quarter in a row where every component index has shown a decrease. There’s really a total lack of good news in the [AICPA] survey.”
This survey also showed that most CPAs were less optimistic this time around for their own company’s growth, a change from previous AICPA economic surveys in which CPAs held a rosier view of their own company’s outlook than the overall economy’s.
CPAs who work for small businesses, not surprisingly, had some of the dimmest views on their company’s ability to grow and the U.S. economy as a whole. The survey showed that 20% of small businesses have less liquidity than needed and expect to have difficulties obtaining liquidity, versus only 1% of very large businesses that felt this way. Similarly, 45% of CPAs from large businesses said they have more liquidity than needed, compared with just 26% of those from small businesses.