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Overview
The results of the 4Q AICPA/UNC Kenan-Flagler Business and Industry Economic Outlook Survey are decidedly negative. Pessimism is at an all time high with pessimists outnumbering optimists by a ratio of 16 to 1. Eighty-two percent of respondents indicated they were pessimistic or very pessimistic up from 62% who responded that way in 3Q and 18% indicated that they were Very Pessimistic up from 6% who felt that way in 3Q. Respondents don’t see any change in the near term as only 9% expect the economy to begin to improve before the 2nd half of 2009 and 49% expect that it will be 2010 or later before the economy improves. Despite this the majority (54%) of respondents do not think Congress should pass a second economic stimulus.
Organizations are Pessimistic Too
For the first time, the number of CPAs with pessimistic outlooks for their own organizations exceeded the number of CPAs with optimistic outlooks. Forty-one percent of respondents were pessimistic or very pessimistic while 26% were optimistic or very optimistic. This marks a reversal of the 3Q survey when 27% were pessimistic and 38% expressed optimism. This trend is mirrored in the expections organizations have for expansion or contraction with 45% of respondents now expecting their firms to contract. In one small nugget of good news 31% of respondents still expect some expansion in the next twelve months. As with past surveys the CPAs surveyed are still more optimistic about the prospects for their own organizations than they are for the US economy.
Credit Challenges
While customer demand remained the top challenge for businesses, capital cost and availability and receivables collection moved up to take the #2 and #3 spots. When asked if the credit crisis was impacting their company directly, 66% indicated that their organizations were being impacted in some way. This is up from 55% that were experiencing issues in April. Twenty-eight percent are experiencing problems with collections, 25% are experiencing higher credit costs and/or stricter terms and 21% are finding that previously available sources of financing are no longer available.
Responding to Economic Conditions
This quarter we once again included a question concerning actions companies are taking in response to current economic conditions. After showing only small changes in the previously two quarters, this quarter showed significant change with many companies taking at least one action. Related to concerns about credit, capital spending cuts were the most frequently cited action followed by Hiring Freezes and Travel Restrictions.
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April 2008 |
July 2008 |
Nov 08 |
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Capital spending cuts |
22.8% |
24.8% |
39.7% |
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Hiring freezes |
22.6% |
23.3% |
36.2% |
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Travel restrictions |
21.4% |
26.8% |
34.4% |
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Compensation freezes |
17.1% |
18.0% |
30.8% |
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Layoffs |
16.3% |
18.7% |
31.1% |
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Outsourcing |
9.2% |
9.5% |
7.8% |
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Facilities closings |
7.5% |
7.1% |
9.9% |
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Other |
8.0% |
7.4% |
8.0% |
Survey Background
The survey was conducted of AICPA Business & Industry members between November 5, 2008 and November 17, 2008 and had 1606 qualified respondents. Almost half the respondents (49%) were CFOs, 25% were Controllers and 17% were CEOs or COOs. Sixty-eight percent of respondents came from privately owned entities, 13% from public companies, 11% from government, education and not-for-profits and 4% from foreign owned companies. Nine percent came from organizations with annual revenues of 1 billion or more, 21% from organizations with $100 million to under $1 billion in annual revenues, 44% from organizations with $10 million to $100 million and 27% from organizations with under $10 million in revenues.
4Q 2008 Economic Outlook Survey Summary
4Q 2008 Economic Outlook Survey Charts
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