Industry Economic Outlook Survey Detailed Survey Results: 2Q 2019 - PowerPoint PPT Presentation

Management Accounting AICPA Business and Industry Economic Outlook Survey Detailed Survey Results: 2Q 2019

Survey Background • Conducted between May 7-28, 2019 • Quarterly survey • CPA decision makers – primarily CFO’s, CEOs and Controllers • AICPA members in Business & Industry • 785 qualified responses 2 2Q 2019 Economic Outlook Survey

Survey Highlights 57 % 63 % 75 Overall index drops slightly to 75 Percentage optimistic about Expansion plans soften; employment plans hold flat U.S. Economy remains Optimism, expansion, revenues constant at 57% and profits ease 1 to 3 points. Overall expansion plans decline from 66% to 63%. Global optimism recovers a Employment and spending plans point to 35%, but still flat with the exception of training significantly down from 71% Employment plans hold flat, availability of skilled personnel which dropped 2 points. first quarter 2018. and turnover remain significant challenges. 3 2Q 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 • Revenue - Expectations for increases or decreases in revenue over the next 12 months for their own • 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 2Q 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. 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 CPA Outlook 72 75 78 74 72 71 69 63 68 69 74 76 75 77 79 81 79 79 76 76 75 Index 5 2Q 2019 Economic Outlook Survey

CPA Outlook Index (CPAOI) Component 2Q18 3Q18 4Q18 1Q19 2Q19 ∆Q to Q ∆Y to Y  02  13 U.S. Economic Optimism 83 79 71 72 70  02  05 Organization Optimism 80 81 79 77 75  01  04 Expansion Plans 79 80 77 76 75  01  02 Revenue 83 85 83 82 81  03  05 Profits 77 79 77 75 72 ➔ 00  04 Employment 75 76 73 71 71 ➔ 00  02 IT Spending 82 82 81 80 80 ➔ 00  04 Other Capital Spending 78 78 73 74 74  02  04 Training & Development 77 75 74 75 73  01  05 Total CPAOI 79 79 76 76 75 6 2Q 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% 2.2.% 50 0.0% GDP Growth 40 -2.0% 30 -4.0% 20 -6.0% 10 -8.0% 0 -10.0% 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 CPA Outlook 81 79 79 76 76 75 Index Change 2.2% 4.2% 3.4% 3.1% 2.2% in GDP 7 2Q 2019 Economic Outlook Survey

U.S. Economy, Organization and Inflation 57 % 29 % 62 % Organization optimism Concern about inflation Optimism for U.S. economy eases 3 points dropped to 29% consistent with Q1 Optimism for respondent’s own Concern about labor costs Optimists cite continued overall organization eases another continues to be most significant, economic strength, lower taxes three points from 65% to 62% moving 38% to 39% and less regulatory burden. optimistic. Raw materials cost concerns also Pessimists cite impact of tariffs on Expansion plans ease from gain 1 point to 29% purchasing and overall growth, 66% having plans to 63%. slowing global demand and auto Interest rate concerns decreased industry easing, along with high The percentage of companies from 20% to 18%. levels of national, corporate and expecting their businesses to Energy cost concerns remain personal debt. contract remained at 14%. constant at 7% 8 2Q 2019 Economic Outlook Survey

Optimism & Expansion 100% The economic 90% 90% outlook for the 80% 80% U.S. economy, 70% 70% your organization, 60% 60% and the expansion 50% 50% plans over the 40% 40% next 12 months 30% 30% 20% 20% 10% 10% 0% 0% 2Q1 Q16 3Q1 Q16 4Q1 Q16 1Q1 Q17 2Q1 Q17 3Q1 Q17 4Q1 Q17 1Q1 Q18 2Q1 Q18 3Q1 Q18 4Q1 Q18 1Q1 Q19 2Q1 Q19 U.S. 37% 37% 38% 38% 62% 62% 69% 69% 64% 64% 64% 64% 74% 74% 79% 79% 74% 74% 69% 69% 57% 57% 57% 57% 57% 57% Organiz nizatio tion 53% 53% 53% 53% 61% 61% 66% 66% 64% 64% 66% 66% 70% 70% 71% 71% 70% 70% 69% 69% 68% 68% 65% 65% 62% 62% Ex Expans nsion ion 58% 58% 62% 62% 62% 62% 67% 67% 64% 64% 65% 65% 71% 71% 72% 72% 70% 70% 70% 70% 67% 67% 66% 66% 63% 63% 9 2Q 2019 Economic Outlook Survey

Inflation or Deflation 100% For your 90% business, over 80% the next 6 70% months, which 60% are you more 47% 49% 50% concerned 49% 40% 47% 34% about? Inflation 31% 32% 38% 27% 29% 28% 23% 23% 25% 23% 30% 26% 27% or deflation? 33% 23% 18% 22% 20% 14% 12% 10% 12% 10% 10% 11% 11% 10% 6% 6% 3% 5% 5% 5% 5% 5% 3% 2% 2% 2% 0% 4% 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 Inflation Deflation 10 2Q 2019 Economic Outlook Survey

Inflationary Risk Factors Which of the 50% following 45% 41% 39% 39% 38% potential 40% 36% 35% 32% 31% inflationary 29% 28% 30% 28% 25% factors 20% 20% 19% 18% 20% 18% represents the 15% 10% 7% 7% 7% most significant 6% 6% 5% 5% 5% 5% 4% 3% 5% 3% 2% 2% 1% risk to your 0% Raw Energy Interest Food costs material Labor costs Other business? costs rates costs 2Q18 2% 7% 31% 39% 18% 4% 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% 11 2Q 2019 Economic Outlook Survey

Key Performance Indicators Hiring and Revenues and Spending Plans Employment Profits Spending plans mixed Headcount plans constant; Expected rate for IT spending Revenue and Profit down from 3.5% to 3.4% healthcare cost projections projections both showing decline another tenth Other capital spending up from decreases 2.9% to 3.0% Expected rate of increase for Anticipated rate of headcount Expected revenue for coming training drops from 2.3% to remained constant at 1.9% twelve months decreased from 2.1% 4.4% in Q1 to 4.2% in Q2 Salary and benefit expected cost Marketing spending plans drop increases a tenth to 2.7% Profit projections also decreased from 2.0% to 1.6% from 3.6% in Q1 to 3.1% Healthcare cost projections R&D spending plans drop four dropped another tenth to a new tenths from a 1.9% rate to low of 5.1% 1.5% 12 2Q 2019 Economic Outlook Survey

Key Performance Indicators Expected Growth in Revenue and Profits 10.0% Thinking about 8.0% the coming 12 months, please 6.0% comment on the 4.0% probable change 2.0% for your 0.0% organization for -2.0% each of the following key -4.0% performance -6.0% indicators -8.0% -10.0% 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 Revenue 3.8% 4.4% 4.7% 3.6% 3.2% 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% Profit 2.9% 3.6% 3.9% 2.8% 2.4% 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% 13 2Q 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 4.0% comment on the 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% 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 Employees 1.3% 1.8% 2.1% 1.6% 1.5% 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% Salary & Benefits 2.1% 2.4% 2.5% 2.0% 2.1% 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% Healthcare 5.7% 6.6% 5.9% 5.8% 5.8% 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% 14 2Q 2019 Economic Outlook Survey