Economic Uncertainty Breeds More Forecasting
Economic Uncertainty Breeds More Forecasting

Some 51% of executives believe the U.S. economy is either already in recession or will be by the new year, according to responses for the fourth-quarter AICPA & CIMA Economic Outlook Survey. The survey polls chief executive officers, chief financial officers, controllers and other certified public accountants who hold executive and senior management accounting roles.

Only 12% of executives expressed optimism in the U.S. economy during the next 12 months, the lowest level since the throes of the Great Recession in early 2009. That compares to 18% last quarter and 41% a year ago. Inflation, rising interest rates and high energy costs were cited as key reasons for pessimism in the outlook. 

One major overhang for finance teams in recent quarters is uncertainty. One-in-four survey takers say their organizations have increased their rounds of forecasting compared to what they were doing during the pandemic economy. Roughly another third say they are continuing a stepped-up level of forecasting from that time. 

Beyond the frequency of forecasting, more than one-in-four executives say forecasting has become significantly more complex over the past year, with another 37% saying it became slightly more complex. Key factors are uncertainty surrounding pricing issues, supply chain reliability, labor costs and shifting consumer demand.

“We saw record increases in the frequency of forecasting and projections during the pandemic and that trend is clearly continuing amid uncertainty over inflation, supply chain integrity and recession risk,” said Tom Hood, CPA, CITP, CGMA, the AICPA & CIMA’s executive vice president for business engagement and growth. “We expect this pace to stay strong as companies work on their cash flow through the next few quarters.” 

Key pressure points for CFOs as they grapple with heavier workloads, Hood noted, are finance team staffing and digital transformation of finance work streams. Other key findings of the survey:

  • On hiring, 34% of executives said their organizations are looking to fill roles immediately, the same as last quarter, while another 17% said they had too few employees but are hesitant to hire and 8% said they had too many employees, an uptick from 5% last quarter. 
  • Optimism about their own organizations’ prospects over the next 12 months dropped six points from 41% to only 35%
  • 45% of executives said they increased organizational cash position during the past 12 months, with 14% saying they had raised cash on hand substantially. 
  • Inflation was the top concern of executives for the fifth straight quarter. Other top challenges included: “Employee and Benefit Costs” and “Availability of Skilled Personnel.” 

copy of the report can be found on aicpa.org