CPA decision-makers in business and industry have lower optimism about the US economy, but they remain relatively neutral about their own organisations, according to a new AICPA & CIMA survey.
In the second-quarter Business & Industry Economic Outlook Survey, 35% of respondents are optimistic about the domestic economy, down from 43% in the first quarter. Sentiment about the global economy rose slightly (from 21% to 22%), and own-organisation optimism declined slightly (from 49% to 48%).
The quarterly survey gathered responses from 315 CFOs, CEOs, and controllers between 7 May and 28 May.
While sentiment about the domestic economy dropped on a quarterly basis, the 35% mark is well above the 14% who were optimistic in the second quarter of 2023.
The lowered optimism, driven by uncertainty over interest rates and enduring inflation, comes with small bursts of own-organisation confidence. The percentage of businesses expecting to expand in the coming 12 months rose from 51% last quarter to 54%. That sentiment is more common amongst executives with larger businesses.
Projections for revenue and profit increases in the next 12 months rose slightly. Respondents predict an average 2.9% increase in revenue in the coming year, compared with a 2.6% projection one quarter ago. Regarding profits, the 12-month projection increased from 1.4% to 1.5%.
Planned spending is also increasing in some areas. IT expenditures for the coming 12 months rose from 3.4% to 3.8%. While training spending is expected to drop slightly — a 1.7% increase for the coming year, compared with 1.9% in the first quarter — predicted spending on other capital projects grew from 2.1% to 2.2%.
Fifty-six per cent of respondents believe they have the right number of employees — up 7 percentage points from last quarter. Plans to hire have eased; in the first quarter, 22% of leaders said they would add workers, but only 16% say that now.
Leaders continue to cite the same top three challenges as last quarter — inflation, employee and benefit costs, and the availability of skilled personnel — and leaders’ worries are increasing over other topics.
Domestic political leadership jumped three spots to No. 4 on the list of challenges, replacing domestic economic conditions, which is now in fifth place.
As inflation has been a top concern for leaders for years, according to survey results, finance decision-makers are practising vigilance around certain inflationary risk factors. Leaders agree that labour costs represent the most significant risk to their business — jumping to 43% over last quarter’s 38%. Worries around energy costs and raw materials costs have both lessened since last quarter, now standing at 5% over last quarter’s 8% and 20% over last quarter’s 23%, respectively.
Twenty-six per cent of leaders believe that interest rates pose a risk to their business — a 1-point jump since the first quarter.
— Jamie Roessner is a senior content writer at AICPA & CIMA. To comment on this article or to suggest an idea for another article, contact Neil Amato at Neil.Amato@aicpa-cima.com.
