Industry Economic Outlook Survey Detailed Survey Results: 1Q 2019 - PowerPoint PPT Presentation

Management Accounting AICPA Business and Industry Economic Outlook Survey Detailed Survey Results: 1Q 2019

Survey Background • Conducted between February 5-27, 2019 • Quarterly survey • CPA decision makers – primarily CFO’s, CEOs and Controllers • AICPA members in Business & Industry • 844 qualified responses 2 1Q 2019 Economic Outlook Survey

Survey Highlights 66 % 76 57 % Optimism about U.S. Economy Expansion and employment Overall index maintains level of also constant at 57% plans both soften 76 Global optimism declines to Overall expansion plans Optimism about US Economy 34%, down from 71% first decline from 67% to 66%. gains a point to 72, but down 14 quarte 2018. points from Q1 2018 Employment plans also ease Retail optimism improves; slightly, although availability of Capital spending and training up manufacturing and technology skilled personnel remains a one point; all other components declines; construction optimism challenge. down 1-2 points flat. 3 1Q 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 1Q 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 74 74 72 72 71 with increasing 70 69 69 68 63 activity. A reading below 50 indicates a generally negative outlook with decreasing activity. 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 CPA Outlook 70 72 75 78 74 72 71 69 63 68 69 74 76 75 77 79 81 79 79 76 76 Index 5 1Q 2019 Economic Outlook Survey

CPA Outlook Index (CPAOI) Component 1Q18 2Q18 3Q18 4Q18 1Q19 ∆Q to Q ∆Y to Y  01  14 U.S. Economic Optimism 86 83 79 71 72  02  04 Organization Optimism 81 80 81 79 77  01  05 Expansion Plans 81 79 80 77 76  01  04 Revenue 86 83 85 83 82  02  05 Profits 80 77 79 77 75  02  03 Employment 74 75 76 73 71  01  03 IT Spending 83 82 82 81 80  01  05 Other Capital Spending 79 78 78 73 74  01  02 Training & Development 77 77 75 74 75 ➔ 00  05 Total CPAOI 81 79 79 76 76 6 1Q 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% 2.6.% 50 0.0% GDP Growth 40 -2.0% 30 -4.0% 20 -6.0% 10 -8.0% 0 -10.0% 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 CPA Outlook 79 81 79 79 76 76 Index Change 2.9% 2.2% 4.2% 3.4% 2.6% in GDP 7 1Q 2019 Economic Outlook Survey

U.S. Economy, Organization and Inflation 57 % 34 % 65 % Organization optimism Concern about inflation Optimism for U.S. economy eases 3 points dropped to 34% consistent with Q4 Optimism for respondent’s own Concern about labor costs Optimists cite continued strength organization eases another continues to be most significant, of broad range of economic three points from 68% to 65% but eases from 41% to 38% indicators. optimistic. Raw materials cost concerns Pessimists cite trade and tariffs, Expansion plans ease from remains constant at 28% global economy, concerns about 67% having plans to 66%. impact of midterm elections on Interest rate concerns increased policy, and length of current The percentage of companies from 19% to 20%. economic cycle starting to wind expecting their businesses to Energy cost concerns also down. contract also increased from increased a point from 6% to 7% 12% to 14%. 8 1Q 2019 Economic Outlook Survey

Optimism & Expansion The economic 100% outlook for the 90% 90% U.S. economy, 80% 80% your organization, 70% 70% 60% 60% and the expansion 50% 50% plans over the 40% 40% next 12 months 30% 30% 20% 20% 10% 10% 0% 0% 1Q1 Q16 2Q1 Q16 3Q1 Q16 4Q1 Q16 1Q1 Q17 2Q1 Q17 3Q1 Q17 4Q1 Q17 1Q1 Q18 2Q1 Q18 3Q1 Q18 4Q1 Q18 1Q1 Q19 U.S. 28% 28% 37% 37% 38% 38% 62% 62% 69% 69% 64% 64% 64% 64% 74% 74% 79% 79% 74% 74% 69% 69% 57% 57% 57% 57% Organiz nizatio tion 44% 44% 53% 53% 53% 53% 61% 61% 66% 66% 64% 64% 66% 66% 70% 70% 71% 71% 70% 70% 69% 69% 68% 68% 65% 65% Ex Expans nsion ion 52% 52% 58% 58% 62% 62% 62% 62% 67% 67% 64% 64% 65% 65% 71% 71% 72% 72% 70% 70% 70% 70% 67% 67% 66% 66% 9 1Q 2019 Economic Outlook Survey

Inflation or Deflation For your 100% business, over 90% the next 6 80% months, which 70% are you more 60% concerned 47% 47% 49% 50% about? Inflation 49% 38% 40% 34% 33% 31% or deflation? 27% 23% 23% 25% 23% 29% 30% 26% 32% 23% 28% 27% 22% 20% 14% 12% 11% 18% 10% 12% 10% 10% 11% 10% 8% 6% 4% 6% 5% 5% 5% 5% 3% 3% 2% 2% 2% 0% 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 Inflation Deflation 10 1Q 2019 Economic Outlook Survey

Inflationary Risk Factors Which of the 50% following 45% 41% 39% 38% 38% potential 40% 36% 35% 32% 31% inflationary 28% 30% 28% 25% 25% 22% factors 20% 20% 19% 20% 18% represents the 15% 10% 8% 7% 7% most significant 6% 6% 5% 5% 5% 5% 4% 5% 3% 2% 2% 2% 1% risk to your 0% Raw Energy Interest Food costs material Labor costs Other business? costs rates costs 1Q18 2% 8% 25% 38% 22% 5% 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% 11 1Q 2019 Economic Outlook Survey

Key Performance Indicators Hiring and Spending Plans Revenues and Employment Profits Spending plans mixed Expected rate for IT spending Headcount plans ease a Revenue and Profit up from 3.3% to 3.5% point; healthcare cost projections continue strong Other capital spending down projections decline another with both showing gains from 3.0% to 2.9% tenth Expected rate of increase for Anticipated rate of headcount Expected revenue for coming training spend recovers from eased another point from 2.0% to 2.0% to 2.3% twelve months increased 1.9% another point from 4.3% in Q4 to Marketing spending plans up Salary and benefit expected cost 4.4% in Q1 from 1.9% to 2.0% increases remained constant at Profit projections also increased R&D spending plans recover 2.6% from 3.4% in Q4 to 3.6% in Q1 two tenths from a 1.7% rate of Healthcare cost projections increase to 1.9% dropped another tenth to a new low of 5.2% 12 1Q 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% 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 Revenue 3.6% 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% Profit 2.9% 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% 13 1Q 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% 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 Employees 1.5% 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% Salary & Benefits 2.2% 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% Healthcare 6.2% 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% 14 1Q 2019 Economic Outlook Survey