Pessimism, tariff tremors prominent in CPA execs’ sentiment

Sentiment about the U.S. economy and CPA decision-makers’ organizations continues to decline in 2025. Second-quarter results released Thursday by the AICPA and CIMA show a rising percentage of pessimists and more concern about the affects of tariffs. To analyze the results further, the JofA podcast welcomed back Ken Witt, CPA, CGMA, associate director–Management Accounting Research & Development.

In last quarter’s Economic Outlook Survey, half of respondents were optimistic about their company’s outlook for the next year. This quarter, that percentage dropped to 37% — and it’s not the only area in which there is a decline.

Related resources:

• JofA article on how finance leaders are countering tariff volatility.
• The AICPA and CIMA’s tariff resource center.
• The previous quarter’s podcast discussion with Witt.

What you’ll learn from this episode:

• The declines in domestic economic sentiment and own-company optimism.
• Where optimism about the global economy stands.
• Changes in the list of top challenges facing CPA decision-makers.
• The “big topic” in this quarter’s survey.
• An assessment of the impact of tariffs on respondents’ business planning.
• A summary of respondents’ 12-month projections for revenue, profits, and spending.

Play the episode below or read the edited transcript:

— To comment on this episode or to suggest an idea for another episode, contact Neil Amato at Neil.Amato@aicpa-cima.com.

Transcript

Neil Amato: Welcome to early June and another episode of the Journal of Accountancy podcast. This is Neil Amato with the JofA. Early in the months of March, June, September, and December, we reserve this slot for discussion of the quarterly Business and Industry Economic Outlook Survey. There’s plenty to get to in this quarter’s survey, planned for release on our publication date, Thursday, June 5.

Back to discuss the view of CPA decision-makers looking ahead to the next 12 months is Ken Witt, associate director–Management Accounting Research & Development. Ken, welcome back to the podcast. I’ll get right to it. Optimism about the U.S. economy declined 20 percentage points from the first quarter to the second. Tell me some about that drop in optimism and other highlights of the results.

Ken Witt: Sure. As you said, optimism about the U.S. economy declined from 47% in the first quarter to only 27% in the second quarter, and optimism about own-company prospects and expansion plans followed suit. Only 37% of executives are now optimistic about their own companies, down from 50% last quarter. Similarly, only 43% have plans to expand their business, down from 57% from last quarter.

We also have a jump in the number of executives that say they have plans to contract their business, from only 19% last quarter to 30% this quarter. Another thing that we’re seeing this quarter that we haven’t seen since the third quarter of 2021 during the pandemic and post-pandemic period is concern about the global economy. Optimism about the global economy fell 10 points from 29% to only 19%, and global economic conditions appeared in the top 10 list of challenges at the No. 8 slot.

Amato: Yeah, global economic conditions now in that top 10 challenges list. I know that for the most part, the list of challenges continues to be familiar, but what are some of the other highlights of those challenges this quarter?

Witt: I think probably most notably, in addition to global economic conditions making its appearance, domestic economic conditions jumped three spots from the first quarter and now leads the list. Inflation and materials, supplies, and equipment costs followed suit, along with employee and benefit costs and availability of skilled personnel. Those are, as you said, some of the familiar problems that we’ve grown accustomed to seeing on the top 10 challenge list.

Amato: Domestic economic conditions right now, the key word in those domestic economic conditions, correct me if I’m wrong, is tariffs. It’s a big topic.

Witt: You are absolutely right, Neil. As we did in the first quarter, we ask about tariffs in our survey-within-the-survey questions. We asked about the effect of the uncertainty on business planning, the impact of tariffs on our members’ businesses. This quarter, we added a question asking about their response to the impact of tariffs on their business. In the first quarter, we had 49% of respondents say the impact of tariffs at that time was either moderate — potential tariffs at that time — was either moderate or significant. This quarter, that number has jumped to 67%.

We also asked about whether the impact of tariffs would have a positive impact because of price increases on competing products or whether they expected negative impact because of price increases to potential customers or supply chain partners or retaliatory tariffs. Those expecting positive impact declined from 14% in Q1 to 5% in Q2, and those expecting negative impact increased from 59% in Q1 to 67% in Q2.

In terms of responses to the tariffs, we asked a question that had a number of responses, and we asked them to check all that apply, and 32% of our members are increasing the prices of their products, 31% say they’re exploring different supply chain options, 26% are reducing operating costs, another 11% are reducing capital costs, and 13% have accelerated purchase of their imports.

Amato: I guess also in those survey-within-a-survey questions is the topic of a potential recession. What did people say in this quarter about that?

Witt: You’re right. We asked that follow-on question about the likelihood and then the possible extent of a recession. Twenty percent said we were already in one. We had another 34% that said recession was likely by the end of the year, and another 7% said we’d have a recession in 2026. For those that said we were headed in that direction, we had 18% who said they expect the extent of a recession to be severe, 57% expect a moderate recession, and the other 19 [percent] said they’re thinking that the recession would be mild.

Amato: Tariffs are a big deal. They’re ever changing. It’s tough to even follow it day by day, week by week, sometime hour by hour. But let’s talk about some of the other KPIs in this survey: hiring, spending, and also maybe revenue and profit projections for the next 12 months.

Witt: As you might expect, given the downturn in optimism about own-organization prospects, a lot of these KPIs that we track on a regular basis are also turning down. In terms of revenues, last quarter, we were projecting a 3% revenue increase for the coming 12 months. That fell off two full points to only 1% increase in revenues. And profits have turned negative, from people who were projecting a 1.7% rate of increase in their profits in the first quarter and now we’re down to a three-tenths of a percent decline in profits.

IT, other capital spending, and training are also off, as you might expect. In terms of hiring, employee costs, availability of personnel, and turnover continue to be among the top 10 challenges list, but the need for employees declined from 39% to 32%, those who say they need employees. Of those with too few employees, 14% are planning to hire and 18% are hesitant to hire. That number is turned down from previous quarter as well.

Amato: In closing, some respondents do provide comments, free-response comments, and some are saying that in spite of all this current chaos, things will sort themselves out. In the middle of this downturn in optimism, what are some of the other themes that are emerging from respondents’ view of the next 12 months?

Witt: In some respects, there’s a little bit “more of the same.” The concerns continue; interest rates are still in question. There’s a lot of concern about deficits, especially with the potential for reduction in taxes, but some people view that favorably, and the impact on spending that will drive the economy if we have lower taxes.

But like you said, we’ve had a few that say, while there’s great concern about all the chaos and the ups and downs and ins and outs of what’s going on, we have some who think that things will sort themselves out favorably. So we’ll have to wait and see for the next quarter’s survey and see what happens.

Amato: Yes, we will do that. We will also cover some of those topics mentioned on the Journal of Accountancy. You can visit journalofaccountancy.com for the latest news. In the show notes for this episode, we’ll put all the particulars of this survey. Ken Witt, thank you very much for being on the podcast.

Witt: You’re welcome, Neil.