Detailed Survey Results 4Q 2015 Survey Background Conducted - PowerPoint PPT Presentation

Detailed Survey Results — 4Q 2015

Survey Background Conducted between November 3-23, 2015 Quarterly Survey CPA decision makers (primarily CFOs, CEOs and Controllers) AICPA members in Business & Industry only 852 qualified responses American Institute of CPAs

Survey Highlights CPA Outlook Index declines two points overall, easing slightly across most measures • Overall index decreased from 71 to 69 • US economy optimism index component declined three points from 67 to 64 in Q4 continuing the decline from a peak of 80 in Q1 2015 • The organization optimism index declined three points and expansion plan index declined two points; both now stand at 70 Revenue and profit indicators decrease; spending and employment plans maintain • Revenue index decreases two points to 74 and profits index decreases 4 points to 67 • Hiring component continues to be soft at 67, but improves a point from 66 at Q3 • Spending continues to be strong, although training spending eased another point from 69 to 68 Optimism down across sectors; • Retail trade optimism fell sharply from 65% to only 28%, after topping the charts at 85% optimistic in Q2. Retail hiring also fell to a projected rate of less than 1% • Manufacturing hiring projections also fell sharply from a 3.8% increase in Q3 to only .9% for the coming twelve months; however, construction hiring rebounded in Q4 to 2.5% after falling back to only 1.2% in Q3 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 75 74 72 72 71 70 69 69 69 69 69 69 67 66 66 CPA 64 63 62 Outlook 59 58 Index - 69 4Q101Q112Q113Q114Q111Q122Q123Q124Q121Q132Q133Q134Q131Q142Q143Q144Q141Q152Q153Q154Q15 CPA Outlook 62 69 66 58 64 69 67 63 59 66 69 69 69 70 72 75 78 74 72 71 69 Index American Institute of CPAs

CPA Outlook Index Component Indicators Component 4Q14 1Q15 2Q15 3Q15 4Q15 ∆Q to Q ∆Y to Y  03  14 U.S. Economic Optimism 78 80 68 67 64  03  10 Organization Optimism 80 76 73 73 70  02  11 Expansion Plans 81 74 72 72 70  02  11 Revenue 85 78 75 76 74  04  12 Profits 79 72 69 71 67  01  06 Employment 73 68 67 66 67  00  03 IT Spending 80 76 77 77 77  00  03 Other Capital Spending 75 71 72 72 72  01  07 Training & Development 75 70 71 69 68  02  09 Total CPAOI 78 74 72 71 69 American Institute of CPAs

CPA Outlook Index (CPAOI) vs GDP 100 10.00% CPA Outlook Index GDP Growth 90 8.00% 80 6.00% 70 4.00% 60 2.00% 50 0.00% 40 -2.00% 30 -4.00% 20 -6.00% 10 -8.00% 0 -10.00% 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 CPA Outlook 70 72 75 78 74 72 71 69 Index Change -2.10% 4.60% 3.90% 2.20% 0.60% 3.90% 2.1% in GDP American Institute of CPAs

American Institute of CPAs

Outlook for the U.S. and Organizations Optimism for the U.S. Economy continues to soften • The percentage of executives optimistic about the US Economy declined further from 48% in Q3 to 45% in Q4, down from highs of 64% in Q4, 2014, and 68% in Q1, 2015 • Continued, albeit slow, growth of U.S. economy, strength of dollar and low oil prices were cited by optimists • Global economic concerns about China and Europe, along with ongoing concerns about regulation/leadership/political gridlock cited as the primary reasons for those with pessimistic views Organizational optimism and expansion plans also decline • Optimism about own company prospects fell six points from 59% to 53%, down from a peak of 67% in Q4, 2014 • The percentage of companies expecting their business to expand decreased another 3 points from 60% in Q3 to 57% in Q4 • The percentage of companies expecting their businesses to contract significantly remained relatively low at 4% Inflation concerns remain low • Only 23% are concerned about inflation, slightly lower than 25% at Q3 • Concern about labor costs continued as the most pressing concern for 37% of respondents, followed by raw materials costs cited by 23% • Concern about energy costs declined by 5 points in Q3 and remain low at 12% • Concern about interest rates eased another 2 points to 22% American Institute of CPAs

Optimism & Expansion US, Organization, Expansion 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 US 28% 48% 33% 9% 19% 43% 34% 22% 21% 32% 49% 44% 38% 49% 51% 52% 64% 68% 52% 48% 45% Organization 51% 57% 54% 41% 45% 55% 54% 44% 41% 50% 57% 55% 57% 59% 61% 65% 67% 63% 58% 59% 53% Expansion 58% 66% 61% 53% 59% 61% 61% 56% 50% 58% 62% 62% 62% 63% 64% 68% 71% 64% 61% 60% 57% 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% 38% 38% 37% 36% 35% 34% 40% 33% 32% 32% 31% 31% 30% 29% 27% 25% 30% 23% 23% 23% 14% 20% 13% 12% 11% 10% 10% 10% 10% 11% 9% 9% 8% 7% 7% 7% 6% 6% 6% 5% 5% 4% 10% 0% 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 Inflation Deflation American Institute of CPAs

Inflationary Risks and Costs Inflationary Factor Representing the Most Significant Risk to your Business 37% 36% 36% 34% 28% 26% 24% 24% 23% 23% 22% 21% 21% 21% 20% 16% 14% 12% 11% 11% 6% 6% 5% 5% 4% 4% 4% 3% 3% 2% Energy Raw material Interest Food costs Labor costs Other costs costs rates 4Q14 4% 14% 23% 34% 21% 4% 1Q15 3% 11% 20% 36% 24% 6% 2Q15 3% 16% 28% 26% 21% 6% 3Q15 4% 11% 21% 36% 24% 5% 4Q15 2% 12% 23% 37% 22% 5% American Institute of CPAs

American Institute of CPAs

Key Performance Indicators Outlooks for revenue and profits both fall off • Expected revenue increase declines from 3.3% to 2.9% ; expected profit increase also declines from 2.6% to 2.0% Headcount plans ease slightly; salary and benefit, and healthcare costs remained essentially constant • Headcounts are now expected to increase by 1.0% over the next twelve months, easing another three tenths this quarter from the post-recession high projection of 2.1% projection at Q4, 2014 • Expected increases in salary and benefit costs eased two tenths to 1.8% in Q4 • Anticipated healthcare cost eased from 5.8% in the previous three quarters to 5.4% • Expected “other input prices” decreased another 1 tenth to 2.1%, and the expected ability to increase “prices charged” also eased a point from 1.6% to 1.5% in Q4 Key spending plans mixed • Increased spending for IT continues to be the strongest category, but declined slightly from 3.0% in Q3 to 2.8% in Q4 • Other capital spending plans also eased a tenth over from 2.5% to 2.4% • Expected increase in training spending remained constant at 1.4% after recovering to 1.8% in Q2 • Marketing spending remained constant at 1.6%; R&D spending gave back the full half point gain seen in Q3, returning to 1.2% in Q4 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% 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 Revenue 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% 3.3% 2.9% Profit 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% 2.6% 2.0% American Institute of CPAs