Detailed Survey Results — 2Q 2015
Survey Background Conducted between May 12-27, 2015 Quarterly Survey CPA decision makers (primarily CFOs, CEOs and Controllers) AICPA members in Business & Industry only 570 qualified responses American Institute of CPAs
Survey Highlights CPA Outlook Index declines for US Economy and organization prospects, but plans for hiring and spending remain relatively consistent with Q1 • Overall index decreased from 74 to 72 • US economy optimism index component decreased 12 points to 68, after improving significantly in Q4, 2014 and Q1, 2015 • The organization optimism and expansion plan indices continued easing from their Q4, 2014 highs, declining from 76 to 73, and from 74 to 72, respectively Revenue and profit indicators also ease, but spending plans strengthen • Revenue and profit indicators decline 3 points each to 75 and 69, respectively • Hiring component continues to be softest at 67, easing a point from 68 at Q1 • Spending continue to be strong, showing slight improvements over Q1 Optimism mixed across sectors • Optimism in retail topped the charts this quarter making a leap to 85%, while manufacturing, construction, and technology declined • Expansion plans among smaller companies (revenues < $10m) fell from 59% to 47%, and optimism among companies with revenues in excess of $1 billion also declined sharply from 77% in Q1 to only 53% in Q2 • Only 3% of companies overall expect to contract a lot over the coming year, compared to 12% in Q1 American Institute of CPAs
American Institute of CPAs
CPA Outlook Index The CPA Outlook Index is a robust measure of sentiment about the U.S. economy that is supported by the unique insight and knowledge that CEOs, CFOs, Controllers, and other CPA executives have about the prospects for their own organizations, their expectations for revenues and profits, and their plans for spending and employment. The CPA Outlook Index is the composite of the following nine indicators at equal weights: • U.S. Economy Optimism - Respondent optimism about the U.S. economy • Organization Optimism - Respondent optimism about prospects for their own organization • Expansion Plans - Respondent expectations of whether their business will expand over the next 12 months • 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 • Employment - Expectations for increases or decreases in headcount over the next 12 months • IT Spending - Plans for IT spending over the next 12 months • Other Capital Spending - Plans for capital spending over the next 12 months • Training & Development - Plans for spending on employee training and development over the next 12 months A reading above 50 indicates a generally positive outlook with increasing activity. A reading below 50 indicates a generally negative outlook with decreasing activity. American Institute of CPAs
CPA Outlook Index (CPAOI) 78 74 74 72 72 70 69 69 69 69 69 67 66 66 64 63 62 61 59 59 58 2Q103Q104Q101Q112Q113Q114Q111Q122Q123Q124Q121Q132Q133Q134Q131Q142Q143Q144Q141Q152Q15 CPA Outlook 61 59 62 69 66 58 64 69 67 63 59 66 69 69 69 70 72 74 78 74 72 Index American Institute of CPAs
CPA Outlook Index Component Indicators Component 2Q14 3Q14 4Q14 1Q15 2Q15 ∆Q to Q ∆Y to Y U.S. Economic 12 01 67 69 78 80 68 Optimism 03 02 Organization Optimism 75 78 80 76 73 02 04 Expansion Plans 76 79 81 74 72 03 02 Revenue 77 82 85 78 75 03 00 Profits 69 74 79 72 69 01 02 Employment 65 70 73 68 67 01 00 IT Spending 77 79 80 76 77 01 02 Other Capital Spending 70 74 75 71 72 Training & 01 01 70 73 75 70 71 Development 02 00 Total CPAOI 72 75 78 74 72 American Institute of CPAs
CPA Outlook Index (CPAOI) vs GDP 100 10.0% CPA Outlook Index GDP Growth 90 8.0% 80 6.0% 70 4.0% 60 2.0% 50 0.0% 40 -2.0% 30 -4.0% 20 -6.0% 10 -8.0% 0 -10.0% 4Q091Q102Q103Q104Q101Q112Q113Q114Q111Q122Q123Q124Q121Q132Q133Q134Q131Q142Q143Q144Q141Q152Q15 CPA Outlook 52 55 61 59 62 69 66 58 64 69 67 63 59 66 69 69 69 70 72 75 78 74 72 Index Change 4.0% 2.3% 2.2% 2.6% 2.4% 0.1% 2.5% 1.3% 4.1% 2.0% 1.3% 3.1% 0.1%1.80%2.5% 4.1%2.40%-2.104.60% 3.90% 2.20%-0.70 in GDP American Institute of CPAs
American Institute of CPAs
Outlook for the U.S. and Organizations Optimism for the U.S. Economy declines after reaching new highs • The percentage of executives optimistic about the US Economy declined to 52% in Q2 from highs of 64% in Q4, 2014, and 68% in Q1 2015 • Continued economic growth, improved employment picture and low cost of capital and energy were cited as reasons by optimists • Lingering concerns about leadership/politics and about lack of real growth in economy and employment were major issues for pessimists Organizational optimism and expansion plans taper off • Optimism about own company prospects decreased further to 58% down from 63% in Q1, and 67% in Q4, 2014 • The percentage of companies expecting their business to expand also decreased, easing to 61% in Q1, from 64% in Q2, after a high of 71% in Q4; however • The percentage of companies expecting their businesses to contract significantly is only 3% in Q2, 2015 Inflation concerns increase slightly • Only 23% are concerned about inflation, consistent with Q1 • Concern about raw materials costs appeared as the most pressing concern this quarter for 28% of respondents, replacing labor costs (26%) which has been the most pressing concern for the past several quarters • Concern about energy costs (16%) and interest rates (21%) increased by 5 points and by 3 points, respectively American Institute of CPAs
Optimism & Expansion US, Organization, Expansion 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 US 40% 21% 28% 48% 33% 9% 19% 43% 34% 22% 21% 32% 49% 44% 38% 49% 51% 52% 64% 68% 52% Organization 51% 46% 51% 57% 54% 41% 45% 55% 54% 44% 41% 50% 57% 55% 57% 59% 61% 65% 67% 63% 58% Expansion 56% 54% 58% 66% 61% 53% 59% 61% 61% 56% 50% 58% 62% 62% 62% 63% 64% 68% 71% 64% 61% American Institute of CPAs
For your business, are you more For your business, over the next 6 months, are you more concerned concerned about inflation or deflation? about the possibility of …? Inflation or Deflation? 100% 90% 80% 70% 61% 55% 60% 50% 43% 42% 38% 38% 37% 36% 35% 34% 40% 33% 32% 32% 31% 31% 30% 29% 27% 30% 24% 23% 23% 20% 14% 20% 13% 11% 10% 10% 12% 10% 9% 9% 8% 7% 7% 7% 6% 6% 6% 6% 5% 5% 4% 10% 0% 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 Inflation Deflation American Institute of CPAs
Inflationary Risks and Costs Inflationary Factor Representing the Most Significant Risk to your Business 38% 36% 34% 30% 28% 26% 25% 24% 23% 23% 23% 21% 21% 20% 17% 16% 14% 11% 11% 11% 7% 6% 6% 6% 5% 4% 4% 4% 3% 3% Energy Raw material Interest Food costs Labor costs Other costs costs rates 2Q14 4% 11% 23% 38% 17% 7% 3Q14 5% 11% 23% 30% 25% 6% 4Q14 4% 14% 23% 34% 21% 4% 1Q15 3% 11% 20% 36% 24% 6% 2Q15 3% 16% 28% 26% 21% 6% American Institute of CPAs
American Institute of CPAs
Key Performance Indicators Outlooks for revenue and profit ease further from Q4 highs • Expected revenue increase falls from 3.6 % to 3.2%; expected profit increase declines 2.8% to 2.4% Headcount plans, employee and benefit, and healthcare costs remained essentially constant • Headcounts are now expected to increase by 1.5% over the next twelve months as compared to a projected increase of 1.6% in the 1Q 2015 survey • Expected increases in salary and benefit costs inch up a tenth to 2.1% in Q2 Anticipated healthcare cost remains constant at 5.8% • Expected “other input prices” dropped a tenth to 2.0%, but continue to outpace expected ability to increase “prices charged” which remained constant at 1.4% Key spending plans also maintain Q1 2015 levels • Increased spending for IT continues to be the strongest category and remained consistent with Q1 at 3.1% • Other capital spending plans also remained consistent with Q1 at 2.4% • Expected increase in training spending recovered to 1.8% in Q2 after dropping to 1.6% in Q1 • Marketing spending plans increased from 1.6% to 1.8% • R&D spending eased a tenth to 1.2% American Institute of CPAs
Key Performance Indicators Thinking about the coming 12 months, please Expected Growth in comment on the probable change for your organization for … Revenue and Profits 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% -10.0% 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 Revenue 1.8% 2.1% 2.4% 3.7% 3.4% 2.4% 2.8% 3.5% 3.1% 2.6% 2.1% 3.0% 3.1% 3.3% 3.6% 3.6% 3.8% 4.4% 4.7% 3.6% 3.2% Profit 1.8% 1.9% 2.0% 2.9% 2.5% 1.7% 2.4% 2.9% 2.6% 2.2% 1.4% 2.1% 2.4% 2.5% 2.7% 2.9% 2.9% 3.6% 3.9% 2.8% 2.4% American Institute of CPAs
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