The optimistic turn that began last quarter continued in the 3Q 2009 Economic Outlook Survey.  While pessimists still outnumber optimists the gap between the two is closing.  This quarter 41% of respondents had a pessimistic view down from 53% last quarter and 83% in January 2009.  However while optimism is increasing expectations for when things will improve has shifted outward with 43% not expecting improvement until the second half of 2010 or beyond.  At the same time the number who had expected improvement by the end of 2009 dropped from 33% last quarter to 26% this quarter.

In an open-ended question about the most significant factors influencing respondents’ opinions of the US economy pessimists most frequently cited an issue related to government in some way – the deficit, spending, policies and regulations.  Optimists were most likely to cite improving business indicators and demand as the reason behind their optimism. 

Outlook for Organizations

Optimism for respondents’ own organizations improved again this quarter with the optimists now out-numbering pessimists for the first time since July 2008.  Continuing the trend of previous surveys, respondents remain more optimistic about their own organizations than about the US economy.  Supporting this optimism the number of respondents who expect their organizations to expand in the next twelve months also increased from 36% to 42%. Those expectations are offset somewhat by the fact that sixty-one percent of respondents expect that it will be at least 2010 before improvement is felt and fourteen percent think it will take until at least 2011.  Respondents from the technology and professional services industries continue to express the most optimism while those from real estate and construction remain pessimistic.  Concerns about the impact of inflation on businesses grew this quarter with a third of respondents now concerned about inflation in the next 6 months. 

While the number of organizations expecting increased revenue and profits has increased slightly, organizations plans for hiring and spending remain relatively unchanged with those expecting decreases still outnumbering those expecting increases.   This would seem to indicate that while respondents are feeling better about the economy, they are not yet confident enough of improvement to begin to spend and invest again. 

Responding to Current Economic Conditions

Respondents are continuing to take actions in response to current economic conditions increased slightly again this quarter.   The most frequent action being taken by respondents is to freeze compensation with 56% of respondents indicating that their organization had taken this action.  Capital spending cuts and layoffs remained the #2 and #3 actions.   Each of these actions is being taken by about half the respondents.  In addition eleven percent of companies indicated that they planned further layoffs while 10% expect further capital spending cuts and 10% expect to freeze compensation.

Healthcare Viewpoints

This quarter the survey included a number of questions on healthcare.  

The majority of respondents are not in favor of government becoming a major participant in healthcare with only twelve percent supporting a major overhaul with government as a major participant and fourteen percent feeling that no legislation is needed.  The remainder favored some sort of legislation but felt that it should either reduce government involvement or that government should only be a limited participant.  Ninety-two percent of respondents said that their organizations currently offer subsidized healthcare benefits to their employees and only two percent of those are considering dropping them.  Organizations are taking actions to reduce healthcare costs with forty-nine percent increasing employee contributions and twenty-five percent reducing benefits.  Twenty-one percent are increasing incentives for employees to choose high-deductible plans.    

Survey Background

The survey was conducted of AICPA Business & Industry members between July 22, 2009 and August 9, 2009 and had 1093 qualified respondents.    Sixty-three percent of respondents were CFOs, 27% were Controllers and 4% were CEOs or COOs.   Sixty-nine percent of respondents came from privately owned entities, 12% from public companies, 13% from government, education and not-for-profits and 5% from foreign owned companies.  Seven 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, 49% from organizations with $10 million to $100 million and 22% from organizations with under $10 million in revenues. 

3Q 2009 Economic Outlook Survey Executive Summary Results.pdf

3Q 2009 Economic Survey Results Final.pdf