CPAs Pessimistic About Indiana Economy

Regulation, Credit and Employees Costs are Top Concerns

INDIANAPOLIS – Indiana CPAs view the economy and growth prospects for 2009 more pessimistically than the past two years, according to the 2009 Business Outlook Survey conducted by the Indiana CPA Society. Optimism scores declined for the second straight year of the survey, by 36 percent for the U.S. economy since 2007 and by 16 percent for the Indiana economy. On average, Indiana CFOs’ and CPA firm managing partners’ outlooks are pessimistic about the U.S. economy for the next six months, slightly pessimistic toward Indiana, neutral about their industries and moderately positive about their firms.

The Society, in conjunction with the Indiana Business Research Center of the Kelley School of Business at Indiana University, conducted its fourth annual Business Outlook Survey in November 2008 of Indiana CPAs who serve either as CFOs of Indiana businesses or managing partners of Indiana CPA firms. The survey, which consisted of a series of multiple-choice and fill-in-the-blank questions, was sent to 444 Indiana CPAs. Twenty-seven percent participated.

"For the past four years, the Society has been able to tap into the expertise and knowledge that its members can offer as they keep their fingers on the pulse of the economy. Specifically, as it relates to the Business Outlook survey, CFOs and CPA firm managing partners are providing business leaders and the public insight into trends making an impact on Indiana’s economic environment," said Indiana CPA Society Chair Mark Lanning, CPA.

On a continuous rating scale from zero to 100 with zero very pessimistic, 50 neutral, and 100 very optimistic, respondents answered a series of questions concerning their optimism about the business climate for the next six months in the U.S. economy, Indiana’s economy, and their own industries and firms. Indiana CPAs were significantly more optimistic about their own firms than for their industry or Indiana. According to this year’s survey, public organizations listed on the NASDAQ or AMEX are the most pessimistic, a stark transition from the 2007 survey when they were the most optimistic. This year, non-profits are the most optimistic group, however they are still in the slightly pessimistic range.

"As the national economy spirals into a recession, many Hoosiers, whether they are business owners or not, are concerned about the effect it will have on the business environment in Indiana," added Lanning, vice president Investor Relations and treasurer with Hillenbrand, Inc. in Batesville, Ind. "The survey serves to provide an outlook for 2009, and a tool for which the business community can gauge their prospects for the coming year."

According to survey results, the top four business concerns for 2009 are: 1) governmental regulations affecting organizations, 2) cost or availability of credit (rising interest rates), 3) employee and benefit costs, and 4) materials, supplies or equipment costs, and (tied) energy/fuel costs. CPAs indicated a greater degree of concern across all categories compared to 2006 and 2007 with availability of credit increasing substantially.

In light of the recent credit crisis and negative economic growth in 2008, a new section was added to the survey to better understand how issues related to the crisis are affecting CPAs and their clients. With respect to holdings of government securities, 78 percent said the recent crisis has not had an effect, while 18 percent indicated an increase in holdings. The noticeable negative effects of the credit crisis was related to the availability of credit, specifically a reduced availability of long-term credit or financial flexibility.

When asked to identify the period of time it would take for the economy to return to a modest rate of growth, on average CPAs tend to think it will take nine or more months, with half predicting more than a year.

Story Ideas
A number of different story ideas or angles are possible with this topic. Some suggestions include the following:

• Governmental regulations affecting organizations is once again a major concern for Indiana CPAs. Which governmental regulation is of the most concern and how do they anticipate it will affect their business or that of their clients?
  
  
• On average, Indiana CPAs predict it will take nine or more months for the economy to return to a modest rate of growth. What can businesses do until then to protect themselves?
  
  
• What effect will the reduced availability of long-term credit or financial flexibility have on Indiana businesses?

CPAs are a great resource for the media. The Society’s CPA Ambassador Program pairs CPAs as a resource to work with media outlets. To speak with a CPA in your area, contact Jenifer Groth at (317) 726-5010 or jgroth@incpas.org.

Currently, more than 7,000 CPAs in public practice, industry, government and education are members of the Indiana CPA Society. The organization functions as an advocate for the profession through education, public awareness, government relations and promotion of high ethical standards. Programs and services offered by the Society are designed to meet the needs identified for its diverse membership. INCPAS serves the public interest as well as its members.

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