AI AICP CPA Bu Business a and I Industry Econo nomic O - PowerPoint PPT Presentation

AI AICP CPA Bu Business a and I Industry Econo nomic O Outlook ok S Survey Detailed Survey Results: 3Q 2017

Survey B Backgr ckgrou ound Conducted between August 1-16, 2017 • Quarterly Survey • CPA decision makers (primarily CFO’s, CEOs and • Controllers) AICPA members in Business & Industry only • 775 qualified responses • 3Q 2017 Economic Outlook Survey

Surve rvey H Highlights ts 77 65 % 64 % Have expansion plans, but Overall index picks up two Now optimistic about U.S. size matters points Economy Highest total CPAOI since Q4 Overall, expansion plans Outlook for economy 2014 peak at 78 improve a point from 64% to consistent with Q2 65% Retail trade, manufacturing and Significant jumps in revenue and professional service sector profit components Plans for smaller companies optimism eases recover some of Q2 decline Employment constant with Q2 Construction and real estate Plans for larger companies fall Other capital spending up 5 recover from Q2 easing off slightly points over Q2 3Q 2017 Economic Outlook Survey

CPA PA O Outlook I Inde dex ( x (CPAOI) I) The CPA Outlook Index is a robust measure of • The CPA Outlook Index is the composite of the following nine sentiment about the U.S. indicators at equal weights: economy that is supported by the U.S. Economy Optimism - Respondent optimism about the U.S. economy • Organization Optimism - Respondent optimism about prospects for their own organization • unique insight and Expansion Plans - Respondent expectations of whether their business will expand over the next • knowledge that CEOs, 12 months Revenue - Expectations for increases or decreases in revenue over the next 12 months • CFOs, Controllers, and Profits - Expectations for increases or decreases in profits over the next 12 months • Employment - Expectations for increases or decreases in headcount over the next 12 months • other CPA executives IT Spending - Plans for IT spending over the next 12 months • have about the prospects Other Capital Spending - Plans for capital spending over the next 12 months • Training & Development - Plans for spending on employee training and development over the • for their own next 12 months organizations, their • A reading above 50 indicates a generally positive outlook with expectations for increasing activity. A reading below 50 indicates a generally negative revenues and profits, and outlook with decreasing activity. their plans for spending and employment. 3Q 2017 Economic Outlook Survey

CPA PA O Outlook I Inde dex ( x (CPAOI) I) A reading above 50 indicates a generally positive outlook with 78 77 76 increasing activity. 75 75 74 74 72 72 71 70 69 69 69 69 69 68 66 63 63 59 A reading below 50 indicates a generally negative outlook with decreasing activity. 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 CPA Outlook 63 59 66 69 69 69 70 72 75 78 74 72 71 69 63 68 69 74 76 75 77 Index 3Q 2017 Economic Outlook Survey

CPA PA O Outlook I Inde dex ( x (CPAOI) I) 3Q17 ∆Q to ∆Y to Component 3Q16 4Q16 1Q17 2Q17 Q Y  00  19 U.S. Economic Optimism 58 76 79 77 77  02  10 Organization Optimism 68 74 77 76 78  00  4 Expansion Plans 72 74 77 76 76  04  8 Revenue 75 78 81 79 83  05  8 Profits 69 74 74 72 77  00  06 Employment 66 68 71 72 72  01  06 IT Spending 75 77 78 80 81  05  06 Other Capital Spending 71 73 71 72 77  01  04 Training & Development 70 71 73 73 74  02  8 Total CPAOI 69 74 76 75 77 3Q 2017 Economic Outlook Survey

CP CPA O Out utlook I Ind ndex ( (CPAOI) v vs. GD . GDP 100 10.0% 90 8.0% CPA Outlook Index 80 6.0% 70 4.0% 60 2.0% 50 0.0% 40 -2.0% GDP Growth 30 -4.0% 20 -6.0% 10 -8.0% 0 -10.0% 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 CPA Outlook 63 68 69 74 76 75 77 Index Change 0.8% 1.4% 3.2% 2.1% 1.2% 2.6% in GDP 3Q 2017 Economic Outlook Survey

U.S. . Ec Econo nomy, O Organiz izatio ion a and nd I Inf nfla latio ion 26% 64 % 66% Now concerned about Organization optimism inflation; down 5% returns to Q1 level Optimism for U.S. economy Concern about labor costs Optimism for respondent’s remains constant with Q2 continues to be most significant, own organization recovers Q2 increasing another two points Optimists cite general strength of two point decline from 42% to 44% many economic indicators – The percentage of companies Raw material cost increases also consumer spending, employment, with expansion plans also up increase another two points from low inflation, etc. one point from 64% in Q2 to 25% to 27% While both optimists and 65% in Q3 Interest rate concerns fall from pessimists cite dysfunctional The percentage of companies 22% to only 15% politics, hope for reduced expecting their businesses to regulation and tax reform Energy cost risk eases another contract remained constant at continues two points to only 6% 13% 3Q 2017 Economic Outlook Survey

Opt ptim imis ism & & Ex Expansio ion 100% The economic 90% outlook for the 80% U.S. economy, 70% your organization, 60% and the expansion 50% plans over the 40% next 12 months 30% 20% 10% 0% 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 U.S. 22% 21% 32% 49% 44% 38% 49% 51% 52% 64% 68% 52% 48% 45% 28% 37% 38% 62% 69% 64% 64% Organization 44% 41% 50% 57% 55% 57% 59% 61% 65% 67% 63% 58% 59% 53% 44% 53% 53% 61% 66% 64% 66% Expansion 56% 50% 58% 62% 62% 62% 63% 64% 68% 71% 64% 61% 60% 57% 52% 58% 62% 62% 67% 64% 65% 3Q 2017 Economic Outlook Survey

Inflati tion o or Defl flati ation For your business, over the next 6 months, which are you more concerned about? Inflation 38% 36% 35% 33% or deflation? 32% 32% 31% 31% 31% 30% 29% 28% 27% 26% 25% 23% 23% 23% 23% 22% 18% 14% 12% 12% 11% 11% 10% 10% 10% 10% 9% 8% 7% 7% 7% 6% 6% 5% 5% 5% 4% 3% 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 Inflation Deflation 3Q 2017 Economic Outlook Survey

Inflati tionary ry R Risk sk Facto tors rs Which of the following 55% 44% 43% 42% potential 40% inflationary 27% factors 25% 24% 23% 22% 21% 20% represents the 18% 15% 14% 10% most significant 8% 8% 7% 6% 5% 4% 5% 4% 4% 2% 2% 1% 1% 1% risk to your Energy Raw material Interest Food costs Labor costs Other costs costs rates business? 3Q16 4% 5% 18% 55% 14% 4% 4Q16 1% 10% 20% 43% 23% 4% 1Q17 2% 8% 24% 40% 21% 5% 2Q17 2% 8% 25% 42% 22% 1% 3Q17 1% 6% 27% 44% 15% 7% 3Q 2017 Economic Outlook Survey

Ke Key Pe Perfo rform rmance I Indi dicators rs Revenues and Hiring and Spending Plans Profits Employment IT, Other Capital and Training improve; Marketing Revenue and Profit Headcount plans improve and R&D ease slightly projections both show slightly; cost projections up Spending for IT improves to a significant increases 3.5% projected increase in Q3, Anticipated rate of headcount up from 3.2% in Q2 increase for the coming year Expected revenue increase for Other capital spending rate increased from 1.8% to 1.9%; the coming twelve months recovers increases from 2.8% to 3.3% highest level since Q4 2014 to Q1 level of 4.3% Training also ticks up another Salary and benefit costs projected Profit projections also bounce point to 2.1% to increase at a rate of 2.4%, up back to Q1 level of 3.5% after Marketing holds constant at two tenths from 2.2% in Q2 falling to 3.2% in Q2 1.8% Healthcare cost projections jump R&D spending jumps to a 2.0% to 6.3%, up from 5.6% in Q1 and projected increase, a post- 5.5% in Q2 recession high 3Q 2017 Economic Outlook Survey

Ke Key Pe Perfo rform rmance I Indi dicators rs Expected Growth in Revenue and Profits Thinking about the coming 12 months, please comment 10.0% on the probable 8.0% change for your 6.0% organization for 4.0% each of the 2.0% following key 0.0% performance -2.0% indicators: please -4.0% select one growth -6.0% rate for each item, -8.0% from increasing by -10.0% 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 more than 10% to Revenue 2.6% 2.1% 3.0% 3.1% 3.3% 3.6% 3.6% 3.8% 4.4% 4.7% 3.6% 3.2% 3.3% 2.9% 1.7% 3.0% 2.9% 3.6% 4.3% 3.9% 4.3% Profit 2.2% 1.4% 2.1% 2.4% 2.5% 2.7% 2.9% 2.9% 3.6% 3.9% 2.8% 2.4% 2.6% 2.0% 0.7% 1.5% 2.3% 3.1% 3.5% 3.2% 3.5% decreasing by more than 10%.… 3Q 2017 Economic Outlook Survey