Executives’ optimism recedes from historic highs

Sentiment still positive, but trade disputes and worker shortages lead to concerns.

Optimism in the domestic and global economies slipped in the fourth quarter of 2018, with concerns about trade disputes, tariffs, and worker shortages voiced in a quarterly survey of U.S. finance executives.

"There's got to be an adjustment at some point," said Joselin Martin, CPA, CGMA, about the booming economy. Martin is the CFO at Hayles & Howe, an ornamental plasterwork company in Baltimore that is a spinoff of the U.K. firm with the same name.

Despite the concerns, her company has done well this year, a sentiment that mirrors that of other finance professionals. Hayles & Howe's biggest challenge is finding enough workers for renovations at iconic buildings around the nation.

"We're managing growth at this point, which is great," Martin said.

The fourth-quarter Business & Industry Economic Outlook Survey, released by the Association of International Certified Professional Accountants, shows a decrease in all but one of nine components of the CPA Outlook Index (CPAOI). That includes drops in optimism about the U.S. economy, finance decision-makers' own organizations, expansion plans, revenue, profits, and spending plans. The survey was conducted Nov. 7—28 and includes responses from 938 CPAs in executive roles — primarily CEOs, CFOs, controllers, and finance directors.

The overall CPAOI is 76, a drop from 79 the previous quarter but still reflecting positive sentiment overall. The index was at a post-recession high of 81 during the first quarter. The index had risen or remained steady in eight of the previous 10 quarters since dropping five consecutive quarters in 2015 and early 2016. A reading above 50 indicates a generally positive outlook.

Fifty-seven percent of finance executives are optimistic about the U.S. economy, a drop of 22 percentage points from the first quarter and 12 percentage points from the previous quarter.

There was even less optimism regarding worldwide prospects, with 40% holding a favorable outlook on the global economy and 43% saying they were neutral. 

Even with some uncertainty, plans for expansion for U.S. businesses remained high, with 67% of respondents expecting to expand their business over the next year. That's down from 71% a year ago.

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