Yes, finance executives think America’s economy is in a recession, and they see little cause for optimism about the near-term prospects for growth. Most do not, however, think another economic stimulus package or offshore oil drilling are wise mitigation strategies.
Those are conclusions of a new survey by the American Institute of Certified Public Accountants and the University of North Carolina’s Kenan-Flagler Business School. The survey, which queried CEOs, CFOs, COOs, and controllers, had a 3 percent margin of error, according to the AICPA.
Despite their pessimism about the economy, 74 percent of the 1,180 executives polled think the Federal Reserve and Congress should refrain from pumping more cash into the economy in the form of another economic stimulus package like the one approved earlier this year. Moreover, 62 percent advise that the Fed hold interest rates steady.
Respondents also weighed in on aspects of the economy that have become sensitive political subjects, such as how to manage the rising prices of oil and gasoline. Just 9 percent said that nothing should be done and that the market should drive the response. However, only 36 percent supported opening additional land and offshore areas for new drilling, 27 percent favored offering incentives for alternative energy, and just 3 percent prescribed releasing oil from the Strategic Petroleum Reserve.
A majority of executives took a hard line on the struggles of employees who drive to work. High gasoline prices have made commuting expensive, but 63 percent of executives said their companies should not be responsible for helping to defray the costs. Some were more forgiving — 13 percent have utilized flexible or compressed work schedules, and 11 percent have allowed workers to telecommute.
“It is hard to see much good news here,” says Mark Lang, an accounting professor at UNC Kenan-Flagler. “There were some hopeful signs in last quarter’s survey suggesting that the economy might be bottoming out, but weakness persists across the board.”
The raft of negative economic news has finance executives feeling down. Of those polled, 62 percent admitted feeling pessimistic or very pessimistic about the fate of the American economy during the next year. That number is up from 57 percent in the previous quarter. Just 10 percent were optimistic about the economy, and 57 percent said it is already in a recession.
Those findings were in line with the most recent quarterly Duke University/CFO Global Business Outlook Survey, which came out in early July. For the first time, that survey found fuel costs had virtually tied with weakening consumer demand as the top worry of finance chiefs, with inflation also ranking high among CFO concerns.
The negative outlook of finance executives also was portrayed in a recent study by Financial Executives International and Baruch College’s Zicklin School of Business.
“Our members are still seeing increased pressure on profits from rising costs without the ability to raise prices,” says Chris McKittrick, director of members in business, industry, and government for the AICPA. “Expectations for revenue and hiring are trending downward.”
Executive CPAs have predicted slowing growth for the past three consecutive quarters, yet they tend to feel more upbeat about their own companies than about the overall economy. This quarter 38 percent said they were optimistic or very optimistic about their firms’ economic prospects in the next 12 months. That was down from 45 percent who felt hopeful in the first quarter of 2008.