Business executives who are struggling to manage the ongoing impacts of the COVID-19 pandemic continue to hold the most pessimistic view of the U.S. economy since the end of 2011, the second-quarter AICPA Economic Outlook Survey found.
Only 1 in 5 of those respondents expressed optimism about the economy's overall outlook over the next 12 months, down from 61% last quarter, when concerns about the coronavirus outbreak first began building, according to the Association of International CPAs (AICPA).
The optimism metric, at 19%, hadn't fallen as low since the fourth quarter of 2011, in the thick of recovery from the Great Recession. Respondents now expect revenue to shrink 5% over the next 12 months, down from the 4.3% growth rate anticipation from last quarter’s survey.
AICPA conducted this most recent survey May 5-27, and included 1,198 responses from CPAs holding company leadership positions. Since then, some states are starting to ease mandatory closures, as infection rates decrease in many areas. But even as recently as two weeks ago, finance leaders' pessimism was highlighted in the AICPA survey.
In this survey, 81% said their organizations have made downward adjustments to their forecasts. In the first-quarter survey, less than 8% of executives said their companies had done so.
"Not surprisingly, this quarter’s survey documents the severe impact the pandemic has had on the outlook for U.S. businesses," Ash Noah, managing director of CGMA learning, education and development for the Association of International Certified Professional Accountants, said.
"Moving forward, the reopening or ramping up phases in different states will be critical, but the rise of liquidity concerns and the uncertain social and economic environment, including potential second-wave infections and prospects of additional layoffs, continue to present an extremely challenging environment for businesses," Noah said.
There has been a sharp increase, from 7% last quarter to 25% now, in the number of companies reporting an excess number of employees. The number of companies looking to immediately hire employees had the same shift, but in reverse: only 7% are actively seeking job candidates, compared to 26% percent last quarter.
Respondents cited "domestic economic conditions" as their businesses' top challenge, followed by "stagnant/declining markets" and "liquidity."
Business executives listed customer demand and ability to pay, the safety of employees, and cash, financing and capital challenges as their top three pandemic-specific concerns.
The percentage of U.S. executives expressing optimism about their own company's prospects over the next 12 months fell from 66% to 30% quarter over quarter, and those expecting to expand their organizations dropped from 64% to 24%.
"The snapshot was taken at a point where there really was not a lot of good news, and we saw how COVID-19 was impacting other businesses," Bob Sannerud, CFO of LifeLink III, a medical transportation company based in Minneapolis, told CFO Dive Thursday. "I’m really not that surprised about how negative that was."
Even the period of a couple weeks can make a big difference in how people perceive things, Sannerud said. Though, he mentioned, Life Link III saw an immediate drop in activity, because people were scared to go to the hospital.
"We've continued to operate and we see our business bounce back quite quickly, But we occupy a unique space. We have a pretty optimistic outlook through the end of the year."
At Life Link III, Sannerud, who also chairs the Americas Region Advisory Panel for AICPA's management accounting unit, has his eye on his KPIs. Life Link III is tracking call volume, which denotes how many people need their medical transportation services. "Those are our sales," he said, and explained that as people are too nervous to go to the hospital, that number goes down.
"Healthcare is a little different, because people need to go to the hospital to be taken care of, but they don't need to go into a restaurant to eat," Sannerud explained.
He and his team are also closely monitoring their liquidity, and cash availability, which determines employee and rent payments. "Those are the keys to keeping our business open," he said.
With regard to AICPA's survey, Sannerud believes big changes would be necessary for executive attitudes to turn towards optimism. "Outlooks would change with a ramping up and reopening of the states, as well as a vaccine development, and a better understanding of transmission," he said.
"If people better understand how they can be safe, keep their employees safe, and generate that trust that you can walk into a business and be sure you won't be infected, that would renew confidence," Sannerud said. "Certainly, liquidity is big, too. The sooner that trust can be built, the less pressure on that liquidity, because you’re not putting your money out without money coming in."
Sannerud also said he believes employees espouse the same wary pessimism as do the executives surveyed, because they both share the same main concerns about safety and business vitality.
"Things look pretty bleak right now; there's not a lot of good news," Sannerud said. "Moving forward, and ramping up phases of reopening in different states will certainly help address the current social and economic environment."
Additionally, focusing on keeping people safe, and developing trust that your business is safe, will go great lengths towards changing attitudes of CFOs and whole organizations, Sannerud said.