51% of executives say the economy is in or will be in recession by 2023

NEW YORK – About 51% of business executives say the U.S. economy is either already in recession or will be into recession by the New Year, according to the AICPA & CIMA Economic Outlook Survey for the fourth quarter.

The survey interviews chief executive officers, chief financial officers, controllers and other chartered accountants at US companies who hold senior and senior accounting positions.

Just 12% of executives said they were optimistic about the US economy over the next 12 months, the lowest since the turmoil of the Great Recession in early 2009. This compares to 18% in the most recent quarter and 41% a year ago. Inflation, rising interest rates and high energy costs were named as the main reasons for the pessimism in the outlook.

A big hangover for finance teams in recent quarters is uncertainty. One in four survey respondents say their organizations have increased their forecasting rounds compared to what they were doing during the pandemic economy. About another third say they continue at an elevated forecast level from then.

Aside from frequency of forecasting, more than 1 in 4 executives say forecasting has gotten significantly more complex in the past year, with another 37% saying it’s gotten a little more complex. Key factors are uncertainty around pricing issues, supply chain reliability, labor costs and shifting consumer demand.

“During the pandemic, we have seen a record increase in the frequency of forecasts and projections, and this trend is clearly continuing amid uncertainty about inflation, supply chain integrity and recession risk,” said Tom Hood, CPA, CITP, CGMA, Board of Directors, AICPA and CIMA Vice President of Business Engagement and Growth. “We expect this pace to remain high as companies work on their cash flow over the next few quarters.”

According to Hood, the top pressure points for CFOs when struggling with increased workloads are staffing the finance team and the digital transformation of finance workflows.

The AICPA survey is a forward-looking indicator that tracks hiring and business-related expectations for the next 12 months.

Other important results of the survey:

• Upon hiring, 34% of executives said their organizations are now looking for jobs, just as they were last quarter, while another 17% said they are understaffed but are reluctant to hire new employees. Eight percent said they had too many employees, up from 5 percent last quarter.

• Earnings expectations for the next 12 months turned negative (-0.2% decline) after expected zero growth in the last quarter. Revenue growth forecasts also fell quarter-on-quarter from 2.6% to 2.1%.

• Executives’ optimism about their own organizations’ prospects over the next 12 months dropped a further 6 points, from 41% to just 35%.

• 45% of executives said their companies had increased their cash position over the past 12 months, with 14% saying they had significantly increased their cash position.

• US CEOs’ outlook for the global economy over the next 12 months also fell to 7% from 9% in the most recent quarter.

• Inflation was the top concern of corporate executives for the fifth straight quarter. Other top challenges were “Employee and performance costs” and “Availability of specialist staff”.

• The percentage of executives who said their company plans to expand decreased 3 points quarter-on-quarter, from 49% to 47%.

Published by The Business Journal, Youngstown, Ohio.