CFO Pessimists Outpoll Optimists 16- to-1

AICPA and UNC November survey shows "overwhelming" pessimism — not just about the U.S. economy, but about their own firms.
Roy HarrisNovember 24, 2008

The pessimism felt by CFOs and senior-level executive CPAs about the U.S. economy surged in the fourth quarter after three previous periods of increasingly negative feelings, according to a survey by the American Institute of Certified Public Accountants and the University of North Carolina business school.

In fact, the survey of 1,606 finance executives — based on online questionnaire responses between Nov. 5 and Nov. 17 — showed that “pessimists” now outnumber “optimists” by 16 to 1.

“The outlook is overwhelmingly pessimistic,” according to Arleen Thomas, AICPA senior vice president for member competency and development. “Most CPAs working in business and industry don’t expect any improvement in the U.S. economy before the second half of 2009 or the first half of 2010.”

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The Business and Industry Economic Outlook Survey, which AICPA conducts with UNC’s Kenan-Flagler Business School, showed 82 percent of respondents saying that they were pessimistic or very pessimistic, up from 62 percent in the third quarter. In the latest survey, 18 percent of respondents said that they were “very pessimistic,” three times the number who felt that way three months ago.

The survey was first conducted in June 2004, an AICPA spokesman told It was established as quarterly research in 2007.

UNC Professor Mark Lang said it was significant that more CFOs have turned negative on their own organizations. “Up to now, respondents have generally been pessimistic about the economy as a whole but relatively optimistic about their own companies,” Lang said. “More respondents now anticipate decreases in revenues, profits and reduced hiring for their own organizations.” Forty-five percent of respondents, in fact, now expect their companies to contract, while 31 percent of respondents still expect some expansion in the next twelve months.

The survey said that primary drivers of the higher pessimism are the credit crisis and increasing unemployment, with respondents citing declines in consumer spending and consumer confidence, along with increasing economic instability and uncertainty, as causes.

The survey showed CFOs to be divided about the impact of the presidential election and the federal government bailouts of recent months.

As for the timing of a turnaround, the financial executives see little near-term chance of things getting much better. Improvement before the second half of 2009 was foreseen by 9 percent, while 42 percent expect improvement in the second half of 2009 and 49 percent see improvement not coming until 2010 or later.

“CPA decision-makers correctly called the recession in the third quarter survey,” Thomas said, crediting the how they “are trained to be objective and analytical and are not prone to hype and emotion….” Thus, any prediction from this group of economic problems dragging to late 2009 or later, “is a troubling forecast.”

Companies are taking more steps in response to deteriorating economic conditions, according to the survey, with the top actions indicated being capital spending cuts, hiring freezes, layoffs, and travel restrictions. “The drop in optimism is affecting planned investment on research and development, information technology, and other capital improvements,” said Lang. “As firms cut their own expenditures in anticipation of reduced demand for their products, it will become a self-fulfilling prophecy rippling through the economy.”

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