AICPA Business and Industry Economic Outlook Survey Detailed Survey - PowerPoint PPT Presentation

AICPA Business and Industry Economic Outlook Survey Detailed Survey Results: 1Q 2020 Management Accounting & Finance

Survey Background • Conducted between February 4 - 26, 2020 Note: Market decline due to Coronavirus concerns • Quarterly survey began near the end of the time that this survey was in the field. Additional charts breaking down • CPA decision makers the responses accordingly have been added. – primarily CFO’s, CEOs and Controllers • AICPA members in Business & Industry • 867 qualified responses 1Q 2020 Economic Outlook Survey

Survey Highlights Overall Index recovers to Q1 2019 level of 76 US Economy component recovers from 64 to 74  CPAOI  All components up including US Economic and Organization Optimism  Expansion plans, revenue and profit expectations all show gains Early February optimism about Global and US Economy show gains; late month responses reflect significant declines in wake of spread of coronavirus and related impact on markets Economy  Early response show 11% increase in optimism about US Economy and  Similar improvements seen in optimism about own organization and expansion plans Organization  End-of-month responses show declines in global, US and organization optimism Expansion plans rebound to 64% overall; small company plans jump from 52% to 62% Expansion Employment plans also improve for most sectors, especially for smaller companies Employment Global economic conditions and materials, supplies and equipment costs returned to the Challenges top ten challenges at 9 and 10, respectively. 3 1Q 2020 Economic Outlook Survey

CPA Outlook Index (CPAOI) The CPA Outlook Index is a robust measure of The CPA Outlook Index is the composite of the sentiment about the U.S. following nine indicators at equal weights: economy that is supported by the unique insight and • U.S. Economy Optimism - Respondent optimism about the U.S. economy knowledge that CEOs, • Organization Optimism - Respondent optimism about prospects for their own organization CFOs, Controllers, and • Expansion Plans - Respondent expectations of whether their business will expand other CPA executives over the next 12 months • Revenue - Expectations for increases or decreases in revenue over the next 12 have about the prospects months for their own • Profits - Expectations for increases or decreases in profits over the next 12 months organizations, their • Employment - Expectations for increases or decreases in headcount over the next 12 months expectations for revenues • IT Spending - Plans for IT spending over the next 12 months and profits, and their plans • Other Capital Spending - Plans for capital spending over the next 12 months for spending and • Training & Development - Plans for spending on employee training and development over the next 12 months employment. 4 1Q 2020 Economic Outlook Survey

CPA Outlook Index (CPAOI) A reading above 50 indicates a generally 81 positive outlook 79 79 79 77 76 76 76 76 75 75 74 74 72 72 72 71 with increasing 69 69 68 63 activity. A reading below 50 indicates a generally negative outlook with decreasing activity. 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 CPA Outlook 74 72 71 69 63 68 69 74 76 75 77 79 81 79 79 76 76 75 72 72 76 Index 5 1Q 2020 Economic Outlook Survey

CPA Outlook Index (CPAOI) Component 1Q19 2Q19 3Q19 4Q19 1Q20 ∆Q to Q ∆Y to Y  10  02 U.S. Economic Optimism 72 70 60 64 74  05  01 Organization Optimism 77 75 72 73 78  04  01 Expansion Plans 76 75 72 71 75  05  01 Revenue 82 81 76 76 81  02  02 Profits 75 72 70 71 73  01  00 Employment 71 71 68 70 71  01  01 IT Spending 80 80 80 80 81  03  00 Other Capital Spending 74 74 74 71 74  01  02 Training & Development 75 73 72 72 73  04  00 Total CPAOI 76 75 72 72 76 6 1Q 2020 Economic Outlook Survey

CPA Outlook Index (CPAOI) vs. GDP 100 10.0% 90 8.0% CPA Outlook Index 80 6.0% 70 4.0% 60 2.0% 2.1% 50 0.0% GDP Growth 40 -2.0% 30 -4.0% 20 -6.0% 10 -8.0% 0 -10.0% 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 CPA Outlook 76 76 75 72 72 72 Index Change 3.1% 3.1% 2.0% 2.1% 2.1% in GDP 7 1Q 2020 Economic Outlook Survey

U.S. Economy, Organization and Inflation 61 % 66 % 17 % Optimism for U.S. economy Organization optimism also Concern about inflation rebounds 11 points rebounds up from 58% dropped to 17%; concern about deflation dropped to 7% Optimists cite strong employment, Expansion plans also rebound to low inflation, economic, real estate 64% overall. Small company Concern about labor costs continues and equity market strength. expansion plans up from 52% to to be most significant at 46%. 62% quarter over quarter. Pessimists cite length of recovery, Raw materials cost concerns ongoing political divisiveness, and The percentage of companies remained constant at 26%. concern about potential effect of expecting their businesses to Interest rate concerns eased from election. contract eased from 17% to 14%. 13% to 12%. Coronavirus concerns also cited, Energy cost concerns as most with particular impact at end of significant risk now at 6%. month – see specified charts. 8 1Q 2020 Economic Outlook Survey

Optimism & Expansion 100% The economic 90% outlook for the 80% U.S. economy, 70% your organization, 60% and the expansion 50% plans over the 40% next 12 months 30% 20% 10% 0% 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 U.S. 69% 64% 64% 74% 79% 74% 69% 57% 57% 57% 42% 50% 61% Organization 66% 64% 66% 70% 71% 70% 69% 68% 65% 62% 58% 58% 66% Expansion 67% 64% 65% 71% 72% 70% 70% 67% 66% 63% 61% 59% 64% 9 1Q 2020 Economic Outlook Survey

Global Optimism – Coronavirus Impact Market decline due to Coronavirus concerns 50% 46% 45% began near the end of 45% the time that this 40% 40% survey was in the 36% 35% 33% 35% field. 30% 24% This chart provides a 22% 25% breakdown between 18% 20% the early respondents 15% to the survey and those who responded 10% to the final reminder 5% on February 25 0% regarding their TOTAL EARLY RESPONSES LATE RESPONSES optimism about the global economy. Optimistic Neutral Pessimistic 1Q 2020 Economic Outlook Survey 10

US Optimism – Coronavirus Impact Market decline due to Coronavirus concerns 70% began near the end of 63% 61% the time that this 60% 53% survey was in the 50% field. 40% This chart provides a breakdown between 26% 26% 26% 30% 21% the early respondents to the survey and 20% 13% 11% those who responded 10% to the final reminder on February 25 0% regarding their TOTAL EARLY RESPONSES LATE RESPONSES optimism about the Optimistic Neutral Pessimistic global economy. 1Q 2020 Economic Outlook Survey 11

Organization Optimism – Coronavirus Impact Market decline due to Coronavirus concerns 70% 68% 66% began near the end of the time that this 60% 57% survey was in the 50% field. 40% 33% This chart provides a breakdown between 30% 23% 22% the early respondents 20% to the survey and 10% 11% 10% those who responded 10% to the final reminder on February 25 0% regarding their TOTAL EARLY LATE RESPONSES RESPONSES optimism about the prospects for their Optimistic Neutral Pessimistic own organization. 1Q 2020 Economic Outlook Survey 12

Inflation or Deflation? 100% For your 90% business, over 80% the next 6 70% months, which 60% are you more 49% 49% 50% 47% 47% concerned 40% about? Inflation 34% 27% 29% 30% 26% 31% 33% or deflation? 23% 19% 17% 20% 10% 5% 8% 11% 6% 5% 5% 5% 7% 3% 3% 2% 2% 2% 0% 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 Inflation Deflation 13 1Q 2020 Economic Outlook Survey

Inflationary Risk Factors Which of the 50% 45% following 40% 35% potential 30% inflationary 25% 20% factors 15% represents the 10% 5% most significant 0% Energy Raw material Interest Food costs Labor costs Other risk to your costs costs rates 1Q19 2% 7% 28% 38% 20% 5% business? 2Q19 3% 7% 29% 39% 18% 5% 3Q19 2% 5% 32% 37% 20% 4% 4Q19 3% 5% 26% 47% 13% 7% 1Q20 1% 6% 26% 46% 12% 9% 14 1Q 2020 Economic Outlook Survey

Key Performance Indicator Summary Hiring and Revenues and Spending Plans Employment Profits Spending plans rebound Headcount plans rebound; Expected rate for IT spending Revenue and profit gains from 3.5% to 3.6% cost projections hold projections both jump Other capital spending recovered four tenths from Anticipated rate of headcount Expected revenue for coming 2.5% to 2.9% increase eased from 1.6% to 2.0% twelve months increased from Expected rate of increase for 3.4% in Q4 to 4.3% Salary and benefit expected cost training also recovers two gains one tenth to 2.6% Profit projections rebounded tenths, improving to 2.1% from 2.7% in Q4 to 3.3% in Q1 Healthcare cost projections Marketing spending plans give decreased a tenth from an back two tenths, easing from expected rate of increase of 5.2% 2.0% to 1.8% to 5.1% R&D spending remains constant at 1.7% 15 1Q 2020 Economic Outlook Survey