Optimism mixed among US finance leaders

Optimism about the U.S. and global economy among CPA decision-makers declined in the second quarter of this year, according to the AICPA and CIMA Economic Outlook Survey. However, the finance leaders are slightly more optimistic about their own organization’s prospects for the coming 12 months.

Almost one-third of the 212 CEOs, CFOs, and controllers surveyed in May said they were optimistic about the U.S. economy over the next 12 months, down from 39% in the previous quarter. Almost half of executives (49%) are optimistic about their own organization, up from 47%. On the global economy, optimism fell from 23% in the first quarter to 19% this quarter.

Optimists are encouraged by strong underlying fundamentals, along with the expectation of a resolution to geopolitical issues. Pessimists are concerned about energy prices, continued inflation, and geopolitical uncertainty.

About 81% of respondents are concerned about inflation over the next six months, a big jump from 56% in the first quarter, according to survey results released Thursday. Inflation hit an annual rate of 3.3% in April.

“The data points to a clear divergence,” Tom Hood, CPA/CITP, CGMA, executive vice president—Business Growth & Engagement at the Association of International Certified Professional Accountants, said in a news release. “Economic optimism is softening, particularly at the global level, while confidence in individual organizations continues to hold. That contrast reflects a business environment shaped by external uncertainty but supported by steady underlying fundamentals.”

Revenue and profit projections for the coming 12 months declined. Projected revenue growth is 2.6%, down from a 2.9% forecast in the first quarter. Projected growth in profit for the coming 12 months fell from 1.6% last quarter to 1.1% this quarter.

Employee and benefit costs are the top challenges facing companies, followed by inflation (up three spots), and materials, supplies, and equipment costs. Domestic economic conditions ranked fourth on the list of challenges, followed by domestic political leadership.

Other findings in the survey:

Recession worries: The percentage of respondents who foresee a recession in the coming year or believe the United States is already in a recession rose from 36% last quarter to 51% this quarter.

Middle East conflict’s economic and energy impact: Overall, 62% expect at least an indirect impact, including increased supply chain costs, from the Middle East conflict. Also, 74% say there’s been at least a moderate negative impact from higher energy prices.

Expansion and hiring: Expected business growth remained steady, with a slim majority (54%) of executives predicting expansion. On the hiring front, 28% said they have too few employees, and 13% said they have too many; 12% said they have too few employees but remain hesitant to hire — down 5 percentage points from last quarter.

Spending plans: Spending on IT is expected to grow 3.4% in the coming 12 months, and spending on other capital is projected at 2.9%, both improved over the first quarter. Predicted spending on training and development remained steady.

— To comment on this article or to suggest an idea for another article, contact Kevin Brewer at Kevin.Brewer@aicpa-cima.com.