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

Management Accounting AICPA Business and Industry Economic Outlook Survey Detailed Survey Results: 3Q 2019

Survey Background • Conducted between July 30-August 21, 2019 • Quarterly survey • CPA decision makers – primarily CFO’s, CEOs and Controllers • AICPA members in Business & Industry • 755 qualified responses 2 3Q 2019 Economic Outlook Survey

Survey Highlights 42 % 72 61 % Overall index drops three points Expansion plans relatively firm Percentage optimistic about to 72 U.S. Economy dropped from Overall expansion plans 57% to 42% All components down from Q2 decline slightly from 63% to with the exception of technology 61%. Global optimism falls to only spending and other capital 24% optimistic, down from 35% spending which were flat Employment plans ease, in Q2. availability of skilled personnel US Economy component now and turnover remain significant the lowest component at 60, challenges. down from 79 in Q3 2018. 3 3Q 2019 Economic Outlook Survey

CPA Outlook Index (CPAOI) The CPA Outlook Index is a robust measure of sentiment about the U.S. The CPA Outlook Index is the composite of the economy that is supported following nine indicators at equal weights: by the unique insight and knowledge that CEOs, • U.S. Economy Optimism - Respondent optimism about the U.S. economy CFOs, Controllers, and • Organization Optimism - Respondent optimism about prospects for their own organization other CPA executives • Expansion Plans - Respondent expectations of whether their business will expand over have about the prospects the next 12 months for their own • Revenue - Expectations for increases or decreases in revenue over the next 12 months • 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 expectations for revenues months • 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 employment. over the next 12 months 4 3Q 2019 Economic Outlook Survey

CPA Outlook Index (CPAOI) A reading above 50 indicates a generally 81 positive outlook 79 79 79 78 77 76 76 76 75 75 75 74 74 72 72 71 with increasing 69 69 68 63 activity. A reading below 50 indicates a generally negative outlook with decreasing activity. 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 CPA Outlook 75 78 74 72 71 69 63 68 69 74 76 75 77 79 81 79 79 76 76 75 72 Index 5 3Q 2019 Economic Outlook Survey

CPA Outlook Index (CPAOI) Component 3Q18 4Q18 1Q19 2Q19 3Q19 ∆Q to Q ∆Y to Y  10  19 U.S. Economic Optimism 79 71 72 70 60  03  09 Organization Optimism 81 79 77 75 72  03  08 Expansion Plans 80 77 76 75 72  05  09 Revenue 85 83 82 81 76  02  09 Profits 79 77 75 72 70  03  08 Employment 76 73 71 71 68  00  02 IT Spending 82 81 80 80 80  00  04 Other Capital Spending 78 73 74 74 74  01  03 Training & Development 75 74 75 73 72  03  07 Total CPAOI 79 76 76 75 72 6 3Q 2019 Economic Outlook Survey

CPA Outlook Index (CPAOI) vs. GDP 100 10.0% CPA Outlook Index 90 8.0% 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% 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 CPA Outlook 79 79 76 76 75 72 Index Change 4.2% 3.4% 3.1% 3.1% 2.1% in GDP 7 3Q 2019 Economic Outlook Survey

U.S. Economy, Organization and Inflation 42 % 23 % 58 % Organization optimism Concern about inflation dropped Optimism for U.S. economy eases 4 more points to 23%; concern about deflation falls 15 points jumped to 11% Optimism for respondent’s own Optimists cite continued overall organization eases another four Concern about labor costs continues economic strength, consumer points from 62% to 58% to be most significant at 37% spending and construction. optimistic. Raw materials cost concerns gained 3 Pessimists cite impact of tariff and Expansion plans ease from points to 32% trade issues, along with concern 63% having plans to 61%. about length of recovery and Interest rate concerns returned to ongoing political divisiveness. The percentage of companies 20%, up from 18%. expecting their businesses to Energy cost concerns eased from 7% contract increased to 17%. to 5%. 8 3Q 2019 Economic Outlook Survey

Gl Globa bal T Trad ade Co Conflicts– Imp mpacts Significant negative impact 5% Has your business suffered any Moderate negative impact 11% 45 % impact from trade conflicts in the past Slight negative impact 29% 12 months? If so, how big? No impact 51% Slight positive impact 3% Moderate positive impact 1% Significant positive impact 0% 0% 10% 20% 30% 40% 50% 60% 3Q 2019 Economic Outlook Survey Within A Survey

Gl Globa bal T Trad ade Co Conflicts– Outlook ook Significantly more favorable 2% What is your outlook on global trade 20% Moderately more favorable 3% conditions over the next 12 months as Slightly more favorable 15% compared to the past year? Neutral 26% Slightly more unfavorable 30% 54% Moderately more unfavorable 18% Significantly more unfavorable 6% 0% 10% 20% 30% 40% 3Q 2019 Economic Outlook Survey Within A 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% 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 U.S. 38% 62% 69% 64% 64% 74% 79% 74% 69% 57% 57% 57% 42% Organization 53% 61% 66% 64% 66% 70% 71% 70% 69% 68% 65% 62% 58% Expansion 62% 62% 67% 64% 65% 71% 72% 70% 70% 67% 66% 63% 61% 11 3Q 2019 Economic Outlook Survey

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% 34% about? Inflation 33% 31% 29% 26% 30% 27% or deflation? 23% 28% 20% 18% 11% 10% 2% 11% 5% 5% 5% 5% 4% 3% 3% 2% 2% 6% 0% 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 Inflation Deflation 12 3Q 2019 Economic Outlook Survey

Inflationary Risk Factors Which of the 50% following 45% potential 40% 35% inflationary 30% 25% factors 20% represents the 15% 10% most significant 5% risk to your 0% Raw Energy Interest Food costs material Labor costs Other business? costs rates costs 3Q18 1% 6% 32% 36% 20% 5% 4Q18 3% 6% 28% 41% 19% 5% 1Q19 2% 7% 28% 38% 20% 5% 2Q19 3% 7% 29% 39% 18% 5% 3Q19 2% 5% 32% 37% 20% 4% 13 3Q 2019 Economic Outlook Survey

Key Performance Indicators Hiring and Revenues and Spending Plans Employment Profits Spending plans mixed Headcount plans ease Expected rate for IT spending Revenue and profit constant at 3.4% slightly; healthcare cost projections both fall projections remain constant Other capital spending also constant at 3.0% Expected revenue for coming Expected rate of increase for Anticipated rate of headcount twelve months decreased from training softens from 2.1% to increase eased from 1.9% to 1.7% 4.2% in Q2 to 3.5% in Q3 1.9% Salary and benefit expected cost Profit projections declined from Marketing spending plans eases three tenths to 2.4% 3.1% in Q2 to 2.8% in Q3 constant at 1.6% Healthcare cost projections R&D spending plans ease a remained constant with Q2 at an tenth from a 1.5% rate to 1.4% expected rate of increase at 5.1% 14 3Q 2019 Economic Outlook Survey

Key Performance Indicators Expected Growth in Revenue and Profits 10.0% Thinking about the coming 12 8.0% months, please 6.0% comment on the 4.0% probable change 2.0% for your 0.0% organization for -2.0% each of the -4.0% following key performance -6.0% indicators -8.0% -10.0% 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 Revenue 3.3% 2.9% 1.7% 3.0% 2.9% 3.6% 4.3% 3.9% 4.3% 4.8% 5.0% 4.8% 5.0% 4.3% 4.4% 4.2% 3.5% Profit 2.6% 2.0% 0.7% 1.5% 2.3% 3.1% 3.5% 3.2% 3.5% 3.8% 4.4% 4.0% 4.3% 3.4% 3.6% 3.1% 2.8% 15 3Q 2019 Economic Outlook Survey

Key Performance Indicators Employees, Salary & Benefits, and Healthcare Costs 10.0% Thinking about 8.0% the coming 12 6.0% months, please comment on the 4.0% probable change 2.0% for your 0.0% organization for -2.0% each of the -4.0% following key -6.0% performance -8.0% indicators -10.0% 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 Employees 1.3% 1.0% 0.5% 1.1% 1.3% 1.6% 1.8% 1.8% 1.9% 1.8% 2.1% 2.1% 2.3% 2.0% 1.9% 1.9% 1.7% Salary & Benefits 2.0% 1.8% 1.4% 1.8% 2.1% 2.3% 2.3% 2.2% 2.4% 2.5% 2.7% 2.8% 2.8% 2.6% 2.6% 2.7% 2.4% Healthcare 5.8% 5.4% 5.4% 5.7% 5.6% 6.1% 5.6% 5.5% 6.3% 5.9% 5.6% 5.9% 5.7% 5.3% 5.2% 5.1% 5.1% 16 3Q 2019 Economic Outlook Survey