Detailed Survey Results 3Q 2016 Survey Background Conducted - PowerPoint PPT Presentation

Detailed Survey Results — 3Q 2016

Survey Background Conducted between August 9-24, 2016 Quarterly Survey CPA decision makers (primarily CFOs, CEOs and Controllers) AICPA members in Business & Industry only 452 qualified responses American Institute of CPAs

Survey Highlights CPA Outlook Index improves a point • Overall index improved from 68 to 69 • U.S. economy optimism index component declined a point from 59 to 58 • Organization optimism remained constant at 68, but expansion plans improved 3 points from 69 to 72 Profit, employment and spending for training and development improve • Revenue index increases one points to 75 and profits index increases from 63 to 69 • Hiring component continues improvement from 63 to 66 • Training and Development spending also improves from 67 to 70 Optimism drops in retail, improves in construction, constant in real estate and manufacturing; expansion plans rebound for largest companies • Retail trade fell off from its recovery in 2016 with only 33% of respondents being optimistic in Q3. • Construction optimism improved to 69% up from 59% in Q1 and Q2. Real Estate optimism remained constant at 62%. • Manufacturing optimism eased a point to 47%; hiring remained constant, at a 1.2% expected increase for the coming twelve months • Expansion plans for companies with revenues > $1billion rebounded from the 50% level in the first half of 2016 to 66% in Q3; however, 17% of this segment also indicate they have too many employees. 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) CPA Outlook Index – 69 78 75 74 72 72 71 70 69 69 69 69 69 69 68 67 66 64 63 63 59 58 3Q114Q111Q122Q123Q124Q121Q132Q133Q134Q131Q142Q143Q144Q141Q152Q153Q154Q151Q162Q163Q16 CPA Outlook 58 64 69 67 63 59 66 69 69 69 70 72 75 78 74 72 71 69 63 68 69 Index American Institute of CPAs

CPA Outlook Index Component Indicators Component 3Q15 4Q15 1Q16 2Q16 3Q16 ∆Q to Q ∆Y to Y  01  09 U.S. Economic Optimism 67 64 47 59 58  00  05 Organization Optimism 73 70 63 68 68  03  00 Expansion Plans 72 70 63 69 72  01  01 Revenue 76 74 68 74 75  06  02 Profits 71 67 60 63 69  03  00 Employment 66 67 59 63 66  01  02 IT Spending 77 77 73 76 75  01  01 Other Capital Spending 72 72 67 70 71  03  01 Training & Development 69 68 67 67 70  01  02 Total CPAOI 71 69 63 68 69 American Institute of CPAs

CPA Outlook Index (CPAOI) vs. GDP 100 10.0% 90 8.0% CPA Outlook Index 80 6.0% 70 4.0% 60 2.0% 50 0.0% 40 -2.0% 30 -4.0% GDP Growth 20 -6.0% 10 -8.0% 0 -10.0% 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 CPA Outlook 72 75 78 74 72 71 69 63 68 69 Index Change 4.6% 3.9% 2.2% 0.6% 3.9% 2.0% 1.4% 0.8% 1.1% in GDP American Institute of CPAs

American Institute of CPAs

Outlook for the U.S. and Organizations Optimism for the U.S. Economy recovers another point • The percentage of executives optimistic about the U.S. Economy improved in Q3 to 37%, up a point from Q2, after declining to only 28% optimistic in Q1; pessimism increased a point to 22%; however, this is down from 34% at Q1 • Low energy prices and interest rates were cited by many optimists • Political turmoil and election year were cited by both optimists and pessimists. Organizational optimism remains constant; expansion plans recover further • Optimism about own company prospects remained constant with Q2 at 53% • The percentage of companies expecting their business to expand recovered further to 62%, up from 52% in Q1 and 58% in Q2 • The percentage of companies expecting their businesses to contract also eased another 2 points to 17%, down from19% in Q2 and 25% in Q1 Concern about inflation vs. deflation flips back • Only 11% of respondents indicate concern about inflation in Q3 • Labor costs continued as being the most pressing concern for 55% of respondents • Concern about energy costs declined from 11% to 6%, while interest rates eased another 2 points from 16% to 14% American Institute of CPAs

Optimism & Expansion U.S., Organization, Expansion 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 U.S. 9% 19% 43% 34% 22% 21% 32% 49% 44% 38% 49% 51% 52% 64% 68% 52% 48% 45% 28% 37% 38% Organization 41% 45% 55% 54% 44% 41% 50% 57% 55% 57% 59% 61% 65% 67% 63% 58% 59% 53% 44% 53% 53% Expansion 53% 59% 61% 61% 56% 50% 58% 62% 62% 62% 63% 64% 68% 71% 64% 61% 60% 57% 52% 58% 62% 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% 60% 50% 43% 38% 38% 37% 36% 35% 40% 33% 32% 32% 31% 31% 30% 29% 27% 25% 30% 23% 23% 23% 22% 23% 18% 20% 13% 11% 12% 11% 10% 10% 10% 10% 9% 9% 8% 7% 7% 7% 6% 6% 6% 5% 10% 14% 12% 11% 0% 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 Inflation Deflation American Institute of CPAs

Inflationary Risks and Costs Inflationary Factor Representing the Most Significant Risk to your Business 44% 44% 36% 37% 24% 23% 22% 21% 20% 19% 19% 18% 16% 14% 12% 11% 11% 9% 9% 6% 5% 5% 5% 4% 4% 4% 3% 2% 0% Energy Raw material Interest Food costs Labor costs Other costs costs rates 3Q15 4% 11% 21% 36% 24% 5% 4Q15 2% 12% 23% 37% 22% 5% 1Q16 3% 6% 19% 44% 19% 9% 2Q16 0% 11% 20% 44% 16% 9% 3Q16 4% 5% 18% 55% 14% 4% American Institute of CPAs

American Institute of CPAs

Key Performance Indicators Outlooks for profits recover further; headcount plans also improve • Expected revenue increase eases a point from 3.0% in Q2 to 2.9% in Q3; expected profit increase recovers to 2.0% after dipping in the first half of 2016 • Headcounts are now expected to increase by 1.3% over the next twelve months after falling to a projection of only 0.5% in Q1 • Expected salary and benefit costs increases rose three tenths to 1.8% • Anticipated healthcare cost increases eased a point from 5.7% in Q2, to 5.6% in Q3 • The expected increase in “other input prices” eased 2 tenths to 1.9%; the expected ability to increase “prices charged” also improved 2 tenths to 1.5% in Q3 Key spending plans continue to improve • Increased spending for IT continues to be the strongest category, and improved to 2.8% in Q3 • Other capital spending plans also improved from 2.1% in Q2 to 2.4% in Q3 • Expected increase in training spending also continued to improve, increasing another 3 points to 1.6% in Q3 • Plans for marketing spending remained constant at 1.4%; R&D spending also remained constant with Q2 at 1,1% 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% 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 Revenue 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% 3.3% 2.9% 1.7% 3.0% 2.9% Profit 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% 2.6% 2.0% 0.7% 1.5% 2.3% American Institute of CPAs