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Optimism about the US economy's prospects improved sharply in the second quarter, but compensation freezes, layoffs and capital spending cuts were still on the horizon for about half of companies, according to a survey of CPA financial executives. Nearly one-fifth of respondents were optimistic or very optimistic about the US economy's outlook over the next 12 months. It was the first time in almost two years that the proportion of respondents expressing optimism in the US economy increased quarter to quarter. Recent government actions and the new administration, improving economic indicators and the availability of credit were cited as causes for optimism in open-ended comments by respondents. While more than half of respondents had a pessimistic or very pessimistic outlook for the economy in the second quarter of 2009, overall pessimism was down from 83% in the first quarter. The survey, conducted between April 22 and May 5, included responses from 995 CPAs.

Optimism about the U.S. economy's prospects improved sharply in the second quarter, but compensation freezes, layoffs and capital spending cuts were still on the horizon for about half of companies, according to a survey of CPA financial executives.

Nearly one-fifth of respondents were op- timistic or very optimistic about the U.S. economy's outlook over the next 12 months, according to results from the Business & Industry Economic Outlook Survey Q2 2009, conducted by the AICPA and the University of North Carolina's Kenan-Flagler Business School. Barely 5% expressed simi- lar optimism in the first quarter of 2009. It was the first time in almost two years that the proportion of re- spondents expressing optimism in the U.S. economy increased quarter to quarter. Recent government actions and the new administration, improving economic indicators and the availability of credit were cited as causes for optimism in open-ended comments by respondents.

"You have to keep in mind that we were probably at rock bottom in terms of CFOs' optimism a quarter ago," Tom Foard, CFO of Publishers Circulation Fulfillment Inc. in Towson, Md., told the JofA during the AICPA National CFO Conference in May. "I think you're seeing renewed optimism that we are going to come out of this and that the stimulus plan and the TARP program are going to work. [Regarding timing of recovery] I think we're looking at the middle of 2010."

While more than half of respondents (53%) had a pessimistic or very pessimistic outlook for the economy in the second quarter of 2009, overall pessimism was down from 83% in the first quarter. The percentage of respondents who were "very pessimistic" fell even more sharply - from nearly 21% in the first quarter to 7% in the second quarter.

"[Managers] have optimism for the economy as a whole, but I think they're very cautiously optimistic. I would expect we'll see a quarter or two before firms begin to increase employment, increase spending, increase investment," said Mark Lang, professor of accounting at the University of North Carolina's Kenan-Flagler Business School. "They will need to be a little bit more certain that this is actually a bottom before they actually proceed."

The survey, conducted between April 22 and May 5, included responses from 995 CPAs. Fifty-nine percent were CFOs, 30% were controllers, and 4% were CEOs or COOs. Sixty-five percent of respondents work for privately owned entities, 14% for public companies, 12% for government, education and associations, and 6% for foreign-owned companies. Detailed survey results are available at tinyurl.com/r47loy.