Health and Healthcare

Growing Business Optimism Hampered by Coronavirus Spread

Paul Ausick

Published: March 5, 2020 10:05 am

Optimism among U.S. business executives rose in the first quarter of 2020, according to a new survey from the Association of International Certified Public Accountants (AICPA). While the report is encouraging, the survey was conducted between February 4 and 26, largely before concerns increased about the spread of the coronavirus.

The CPA Outlook Index rose to a score of 76, four points better than the two prior quarters and level with the index score in the first quarter of 2019. The survey results show that optimism about the U.S. economy gained 10 points quarter over quarter and two points year over year to post an index score of 74. The second-most improved sequential score, measuring optimism for the respondent’s own organization, rose five points and one point year over year to an index score of 78.

The outlook for revenues over the next 12 months rose five points sequentially but fell one point year-over-year to 81. Respondents posted an equally optimistic index score for IT spending over the next 12 months, up a point both sequentially and year over year. Expectations for profits rose by two points sequentially and fell by two points year over year to 73.

Ash Noah, an AICPA executive, said:

We are seeing a reversal of a downward trend over the last four quarters with the current survey’s key indicators showing considerable strength, especially around expected growth in revenue and profit supported by high employment and low inflation. But there clearly was a softening in optimism as the survey progressed and an overhang from concerns about coronavirus. Detailed risk analysis and careful forecasting and scenario planning will be essential going forward.

The following chart from the AICPA report indicates the different reactions between early and late responders to the survey. Optimism fell on both the global and U.S. outlooks while pessimism doubled on the global outlook. Pessimism nearly doubled in the U.S. outlook but remains well below global and total pessimism levels.

On a percentage basis, survey respondents who are optimistic about the U.S. economy rose from 50% in the fourth quarter of last year to 61%. Sequential gains in optimism about the organization (58% in the fourth quarter to 66%) and further expansion (up from 59% to 64%) were also noteworthy.

Only 17% of respondents expressed concern about inflation. Labor costs cause the most inflation concern, with 46% of respondents specifying it as their top concern.