Economic optimism, hiring plans rise despite continued concern about inflation

As winter fades into the spring, optimism is on the rise — 43% of finance executives share a sunnier outlook on the U.S. economy, according to the latest quarterly survey released by AICPA & CIMA.

Pessimism about the U.S. economy plummeted 20 points since the fourth quarter of 2023 and now stands at 23%, in line with a 19-point boost in optimism. Forty-nine percent of leaders say they are optimistic about their organizations — the highest organizational optimism number since the first quarter of 2022, when it was 58%.

The survey polled 275 CPA decision-makers — primarily CFOs and controllers — Feb. 6–28 about various economic topics.

Optimism about the global economy is not as high as sentiment about the domestic economy, but it has risen from 14% last quarter to 21%.

Expansion plans grew slightly, with 53% now expecting to expand their businesses. In a six-point drop, only 19% of leaders expect to contract their businesses in the next year.

With the trend in expansion looking upward, hiring plans among leaders took a modest one-point rise (37%). Hesitancy to hire is shared by 15% of leaders, and 22% have immediate plans to increase their workforce, up from 20% the previous quarter.

Executives project a 1.4% increase in company profits over the next 12 months, up from 0.5% last quarter and the highest mark in two years. Projected revenue increases also rebounded to 2.6% — the highest projection in the past year.

Spending plans are also projected to recover two-tenths of a percentage point to 3%, led by a projected rise of 3.4% in IT spending. While anticipated spending on training and development stayed constant at 1.9%, the expected rate of increased spending on other capital eased two-tenths of a percentage point to 2.1%.

Although the overall outlook has improved, inflation still looms. Seventy-one percent of leaders report that inflation will be their biggest concern in the next six months. As for inflationary risk factors, leaders continue to be the most worried about labor costs (38%) and interest rates (25%), though concern about interest rates is six percentage points lower than the previous quarter.

The top challenges for the coming 12 months behind inflation are employee and benefit costs, availability of skilled personnel, and domestic economic conditions.

Leaders shared trepidation over regulatory requirements and changes, a challenge that ranked fifth on the list after being outside the top 10 the previous quarter. Also, concerns about employee turnover have eased, falling from the No. 5 challenge in the third quarter of 2023 to No. 9 this 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.