Pessimism continues to dominate the results of the 1Q 2009 AICPA/UNC Kenan-Flagler Business and Industry Economic Outlook Survey. The outlook for the US economy is virtually unchanged from 4Q 2008 with 83% of respondents responding that their outlook was pessimistic or very pessimistic Twenty percent of those describe themselves as Very Pessimistic. Adding to the pessimism is the fact that respondents now expect it to take longer for the US economy to begin to improve. In 4Q 2008 51% of respondents expected the economy to improve by 2010; now only 32% feel that way with 41% expecting improvement to begin in the 1st half of 2010 and 8% not expecting recovery to begin until 2011.
Outlook for Organizations
Pessimism concerning the outlook for respondents’ own organizations increased slightly again this quarter. While respondents are still slightly more optimistic about their own organizations than about the US economy, the gap between the two is shrinking. And unlike past quarters not one of the industries analyzed (only those with more than 50 respondents are analyzed) has more optimistic than pessimistic respondents. This increased pessimism is supported by respondents declining expectations for revenue, profit and number of employees. Slightly over half the respondents expect these areas to decline. However it should be noted that despite the grim overall outlook about one quarter of respondents still expect increases in revenue, profit and employees.
Responding to Economic Conditions
Companies are continuing to respond to economic conditions by cutting costs. The actions being taken by organizations are reflective of organizations that are looking to cut costs as revenue and profits fall. This quarter showed a significant increase in the number of organizations that have implemented or are planning layoffs, compensation freezes and hiring freezes. Compensation freezes have now replaced capital spending cuts as the top action.
|
|
Apr-08 |
Jul-08 |
Nov-08 |
Jan-09 |
|
Layoffs |
16% |
19% |
31% |
43% |
|
Facilities closings |
7% |
7% |
10% |
14% |
|
Capital spending cuts |
23% |
25% |
40% |
50% |
|
Travel restrictions |
21% |
27% |
34% |
44% |
|
Outsourcing |
9% |
10% |
8% |
9% |
|
Compensation Freezes |
17% |
18% |
31% |
51% |
|
Hiring Freezes |
23% |
23% |
36% |
47% |
|
Other |
8% |
7% |
8% |
9% |
Survey Background
The survey was conducted of AICPA Business & Industry members between January 28, 2009 and February 12, 2009 and had 1183 qualified respondents. Sixty percent of respondents were CFOs, 26% were Controllers and 5% were CEOs or COOs. Sixty-four percent of respondents came from privately owned entities, 16% from public companies, 13% from government, education and not-for-profits and 6% from foreign owned companies. Eleven percent came from organizations with annual revenues of 1 billion or more, 22% from organizations with $100 million to under $1 billion in annual revenues, 47% from organizations with $10 million to $100 million and 20% from organizations with under $10 million in revenues.
1Q 2009_Economic Outlook Survey Results Executive Summary
1Q 2009 Economic Survey Charts