IMA Pulse

Corporate Investment Outlook for 2017

By Kip Krumwiede, CMA, CPA
March 16, 2017
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Recent significant political changes raise the question: What will their impact will be on companies in the current year (2017) and, more specifically, on both corporate and personal investment. IMA® (Institute of Management Accountants) conducted a survey of senior finance professionals in January 2017 to gauge members’ thoughts on this impact.

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Overall, respondents are optimistic about consumer spending this year, with 76% expecting consumer spending to increase this year. The majority put the increase between 2% and 5% or higher. Only 16% expect it to decrease, and the remaining 10% expect it to stay about the same.

 

Only 38% expect the recent U.S. election to have some effect on their companies’ capital expenditure or expansion plans. Those in larger firms (more than 1,000 employees) were more likely to predict some impact than those in smaller firms (fewer than 100 employees), 46% vs. 35%, respectively.

 

More than half (53%) expect their company’s level of capital expenditures to increase in 2017. Others aren’t so certain. One respondent wrote, “We are unsure at this time and are conducting a number of ‘what if’ scenarios.”

 

There has been increased pressure on U.S. companies to locate more of their operations in the United States. We asked respondents about their organizations’ operations located outside the U.S.:

  • 37% have no foreign operations.
  • 34% have fewer than 20% of operations outside the U.S.
  • 19% have between 20% and 50%.
  • 10% have more than 50%.

 

Larger firms were much more likely to have at least 10% of their operations outside the U.S. than smaller firms (69% vs. 15%, respectively).

 

As for shifting operations to the U.S., more than half (58%) expect their organizations’ foreign operations will remain about the same in 2017. Of the rest, 16% said foreign operations would increase, 4% expect them to decrease, and the remaining 22% are unsure.

 

When asked if the recent U.S. election has influenced the company’s decision to engage in non-U.S. operations, responses included the following:

  • 68% said it has had no influence.
  • 14% said it has had some influence.
  • 2% said it has had a great deal of influence.
  • 22% were unsure.

 

Many expect U.S. trade with other countries to change in 2017. More than one-third (35%) expect it to decrease, and 18% expect it to increase. The rest said it will be about the same (41%) or are unsure (6%).

 

Most expect significant changes to the U.S. tax code in 2017. The great majority (77%) said it was likely, and only 18% felt it was unlikely. Yet only about one-third expect it will decrease their company’s tax burden at least somewhat.

 

The results of this survey show that the majority of IMA members are optimistic about consumer spending in 2017. They expect major changes to the U.S. tax code but not much impact on their company’s tax burden. Although there is pressure to do so, the majority doesn’t expect their company will move foreign operations to the U.S. Others said that the changes in U.S. policy will take time to have an impact. One person wrote, “My company will monitor bills passed by the Senate and react accordingly. Impact will be felt in 2018 especially with regard to healthcare costs.”

 



Kip Krumwiede, CMA, CPA, Ph.D., is the director of research for IMA. He can be reached at (201) 474-1732 or kkrumwiede@imanet.org.
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