Finance leaders in the United States have a growing sense of economic optimism, according to the latest AICPA Business and Industry Economic Outlook Survey, but it’s complicated by worries about inflation and labor shortages.
All nine components of the CPA Outlook Index showed signs of improvement in the survey of 770 CPA decision-makers, which was conducted in April and May. The index recovered to 78 on a scale of 100, slightly higher than it was before the pandemic and double the index number from this time a year ago. In fact, the index was at its highest mark since the third quarter of 2018.
In all, 70% of respondents were optimistic about the U.S. economy, and 76% were optimistic about their own organization. In addition, 50% now express optimism about the global economy.
“We’re pretty optimistic with everything reopening,” said Angela Wentz, controller for Virgil Gamache Farms in the state of Washington.
The farm grows 1,200 acres of hops, so it’s heavily dependent on the beer and hospitality industries. Wentz has been glad to see crowds at breweries — especially considering that Washington state has had one of the more restrictive approaches to the pandemic, she said.
“This is good. If we stay open, that means all those other states are doing well, too,” Wentz said. “But we also are keeping track of what’s going on in Europe, in Asia, in South America, in Australia. Those markets matter, too.”
On average, respondents expected a 5% gain in revenue and a 4% increase in profit over the year to come. It’s a dramatic turnaround from a year earlier, when respondents expected an average 5% decline in revenue and a 5.5% drop in profit. Organizations are also planning to hire: Nationwide, about 33% of respondents said that they were planning to hire more workers. Another 14% were short on workers but hesitant to hire more.
In Michigan, Diane Abbonizio, CPA/CITP, CGMA, was looking past the pandemic toward a potential revival driven by recent supply and manufacturing shocks.
“I see an increased focus on domestic manufacturing and us being able to create and build more than we have in the past,” said Abbonizio, president and CEO of United Bay Community Credit Union.
She said the region suffered with the decline of domestic manufacturing, but she hoped that infrastructure investments would help to change that trend.
Abbonizio was also optimistic about her own organization. Its investments are doing well, and its members are in decent financial health, thanks to unprecedented government stimulus and unemployment efforts. “The funds are sitting in their accounts. They’re liquid,” she said.
But government intervention and a rebounding economy have also driven fears of inflation. About 67% of respondents said they were concerned about inflation. That number was as low as 17% in early 2020.
Government spending is “going to drive the value of the U.S. dollar down further, which means ultimately consumer prices are going to go up faster. They’re going to go up faster than people’s incomes, which means a reduction in prosperity,” said Patrick Heller, CPA (inactive), CGMA, communications officer and former owner of Liberty Coin Service, a coin and precious metals dealership in Michigan.
Fearing price increases, the company is stocking up on basic office supplies. But inflation also means more business for Liberty as people rush to buy tangible assets.
“We’ve had a lot of customers that are buying precious metals to protect their finances,” Heller said. “We’ve been in business 50 years, and [the first quarter of 2021] was the highest first quarter in our history for sales volume.”
For the first time since the pandemic began, domestic economic conditions were no longer the top concern for survey respondents. Instead, the most common concerns were about a shortage of skilled workers, the cost of supplies and equipment, and questions about domestic political leadership. In the first quarter of 2020, availability of skilled personnel was eighth on the list of challenges.
For some, optimism is still tempered by uncertainty in the wake of a world-changing event. Wentz said that Virgil Gamache Farms has struggled to decide how much hops it can safely cultivate.
“We have more acres we can be producing on than what we’re actually doing,” Wentz said. The brewing industry already has an oversupply from last year, and the pandemic put some breweries out of business. She expects that turbulence to linger into next year.
“Are these sales going to occur? How likely is it that a buyer is going to come back? All of those things are constantly a worry,” she said.
Still, one common theme is apparent: It’s a world of difference from a year ago.
In Charlotte, N.C., Jerry Sumner, CPA, is the finance director for Elevation Church, which has 350 employees and 21 locations. Since the organization is dependent on donations and in-person services, Sumner originally feared the worst.
“We didn’t know what to expect,” he recalled. But the church saw the digital audiences for its services expand greatly, and donations increased. The organization did so well that it decided to pay off its $3.7 million loan from the Paycheck Protection Program instead of seeking forgiveness, he said.
“I’m definitely more on the optimistic side,” Sumner said. “With the economy reopening now, post-pandemic, a lot of people are just happy to be out from under that cloud.”
— Andrew Kenney is a freelance writer based in Colorado. To comment on this article or to suggest an idea for another article, contact Neil Amato, a JofA senior editor, at Neil.Amato@aicpa-cima.com.