Detailed Survey Results 4Q 2016 1 Survey Background Conducted - PowerPoint PPT Presentation

Detailed Survey Results — 4Q 2016 1

Survey Background Conducted between November 9-30, 2016 Quarterly Survey CPA decision makers (primarily CFOs, CEOs and Controllers) AICPA members in Business & Industry only 600 qualified responses 2 2 American Institute of CPAs

Survey Highlights 74 62% 62% Overall index Now optimistic Have plans for improved about US Economy expansion Up from 69 last quarter, Up from only 38% in Q3 Index component and 69 in Q4 2015 improves from 72 to 74 Outlook for economy at as those with plans to All components up highest level since 1Q contract lower than Q3 quarter to quarter and 2015 year to year Plans for companies Optimism in retail Organization optimism up with revenues >$100 bounces back from only from 68 to 74 million to < $1 billion 33% in Q3 to 50% increase from 59% to Revenue index increases optimistic in Q4 67% three points from 75 to 78; profits from 69 to 74 Manufacturing and other Expansion plans for sectors also show Hiring and spending plans companies with improved optimism also improve revenues > $1 billion ease from 66% to 62% 3 3 American Institute of CPAs

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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. 5 5 American Institute of CPAs

CPA Outlook Index (CPAOI) CPA Outlook Index – 74 78 75 74 74 72 72 71 70 69 69 69 69 69 69 68 67 66 64 63 63 59 4Q111Q122Q123Q124Q121Q132Q133Q134Q131Q142Q143Q144Q141Q152Q153Q154Q151Q162Q163Q164Q16 CPA Outlook 64 69 67 63 59 66 69 69 69 70 72 75 78 74 72 71 69 63 68 69 74 Index 6 6 American Institute of CPAs

CPA Outlook Index Component Indicators Component 4Q15 1Q16 2Q16 3Q16 4Q16 ∆Q to Q ∆Y to Y  18  12 U.S. Economic Optimism 64 47 59 58 76  06  04 Organization Optimism 70 63 68 68 74  02  04 Expansion Plans 70 63 69 72 74  03  04 Revenue 74 68 74 75 78  05  07 Profits 67 60 63 69 74  02  01 Employment 67 59 63 66 68  02  00 IT Spending 77 73 76 75 77  02  01 Other Capital Spending 72 67 70 71 73  01  03 Training & Development 68 67 67 70 71  05  05 Total CPAOI 69 63 68 69 74 7 7 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% 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 CPA Outlook 71 69 63 68 69 74 Index Change 2.0% 1.4% 0.8% 1.4% 3.2% in GDP 8 8 American Institute of CPAs

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US Economy and Organization Highlights 62% 61% 28% Optimism for US Organizational Inflation concerns economy up from optimism up from increase to 2014 only 38% in Q3 53% in Q3 levels Election results cited by both Optimism for respondent’s Concern about labor costs optimists and pessimists continues to be most own organization at 61% is significant but eased from higher than any period since Optimists noted hopes for 55% to 43% 1Q 2015 reduced regulation, repeal of ACA and lower income taxes The percentage of Raw material cost increases companies with expansion Pessimists noted global now concern 20% up from plans maintained the Q3 unrest, healthcare costs, oil 18% in Q3 level of 62% prices and anticipated interest rate increases The percentage of Energy cost and interest rate companies expecting their concerns both jumped – businesses to contract • Energy from 5% to 10% eased from 17% in Q3 to 14% in Q4 • Interest from 14% to 23% 10 10 American Institute of CPAs

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

Inflationary Risks and Costs Inflationary Factor Representing the Most Significant Risk to your Business 44% 44% 43% 37% 23% 23% 22% 20% 20% 19% 19% 18% 16% 14% 12% 11% 10% 9% 9% 6% 5% 5% 4% 4% 4% 3% 2% 1% 0% Energy Raw material Interest Food costs Labor costs Other costs costs rates 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% 4Q16 1% 10% 20% 43% 23% 4% 13 13 American Institute of CPAs

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Key Performance Indicator Highlights Hiring and Spending Revenues Employment Plans and Profits Headcount plans R&D spending and Revenue and Profit “other capital” lead improve; costs also projections both tick up the improvements improve Spending for IT continues to Anticipated increases in Expected revenue increase for ‘lead the league’, projected headcount for the coming coming twelve months at 2.9% in Q4 year increased to 1.6% in q4, improves from 2.9% in Q3 to up from 1.3% in Q3. Training remains constant at 3.6% in Q4 1.6% quarter to quarter Salary and benefit costs are Profit projections also Other capital spending expected to increase at a increase from a 2.3% expected anticipated increase rate of 2.3%, up from 2.1% in increase in Q3 to 3.1% in Q4 improves from 2.4% in Q3 to Q3. 2.7% in Q4 Healthcare cost projections R&D spending jumps from also jumped from 5.6% to 1.1% in Q3 to 1.5% in Q4, the 6.1%, the highest expected highest expected rate rate of increase since Q3 increase since Q3 2015 2014 15 15 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% 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 Revenue 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% 3.6% Profit 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% 3.1% 16 16 American Institute of CPAs

Employees, Salary & Benefits Thinking about the coming 12 months, please comment on the probable change for your and Healthcare Costs organization … 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% -10.0% 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 Employees 1.2% 1.5% 1.1% 0.8% 0.5% 1.1% 1.0% 1.3% 1.2% 1.5% 1.3% 1.8% 2.1% 1.6% 1.5% 1.3% 1.0% 0.5% 1.1% 1.3% 1.6% Salary & Benefits 2.1% 2.0% 2.0% 1.9% 1.9% 2.2% 2.2% 2.3% 2.2% 2.2% 2.1% 2.4% 2.5% 2.0% 2.1% 2.0% 1.8% 1.4% 1.8% 2.1% 2.3% Healthcare 6.0% 6.2% 6.3% 6.4% 6.4% 6.3% 6.7% 6.8% 6.6% 6.2% 5.7% 6.6% 5.9% 5.8% 5.8% 5.8% 5.4% 5.4% 5.7% 5.6% 6.1% 17 17 American Institute of CPAs