Summing up economic sentiment and concerns about inflation, recession

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Optimism among U.S. CPA decision-makers in February improved when compared with the outlook in November, but overall sentiment remains guarded. That’s one conversation topic in the latest Journal of Accountancy podcast episode.

In the episode, Ken Witt, CPA, CGMA, associate director–Management Accounting Research & Development for the AICPA and CIMA, breaks down the sentiment about the domestic economy, the global economy, and respondents’ companies.

The discussion also touches on top challenges, hiring plans, and recession expectations.

What you’ll learn from this episode:

• The increase in own‑company optimism from the previous quarter.
• The reasons that both optimists and pessimists cite for their views.
• The “dance” that inflation and domestic economic conditions have done on the survey’s list of top challenges.
• Projected revenue and profit growth in the coming 12 months.

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: Hello, listeners. Thanks for tuning in to another episode of the Journal of Accountancy podcast. This is Neil Amato with the JofA. Today’s topic: the quarterly Economic Outlook Survey. You’ll hear the discussion and the breakdown of sentiment and top challenges right after this brief sponsor message.

[Sponsor message]

Welcome back to the podcast. Finance decision-makers are slightly more optimistic than they were in the previous quarter. That’s according to the latest AICPA and CIMA Economic Outlook Survey. Survey guru Ken Witt, associate director–Management Accounting Research & Development, joins us to discuss the results.

Ken, welcome back to the podcast. We’re glad to have you on as we discuss these first-quarter results.

Ken Witt: Thanks, Neil. Yes, while much has happened on the news front since we closed the survey on Feb. 25, the survey responses for the first quarter of 2026 are showing some improvement from Q4 like you mentioned.

Amato: Yeah, let’s take a dive into those results. What first is the overview and then maybe run down where people stand on optimism for the domestic economy, the global economy, and their own companies?

Witt: Optimism about the U.S. economy rebounded from 28% in Q4 to 39% of our executives who say they are now optimistic about the overall economy. The number who said they were optimistic about their own-company prospects also improved from 41% to 47%. Those with expansion plans ticked up from 48% to now 55% with plans to expand their business, and the flip side of this is also encouraging. While we’ve had roughly a quarter who have told us they were contracting their business, that percentage dropped to only 17% this quarter. On the global economy, we’ve had just slight improvement on that front as well.

Amato: Great. Thank you for that. You mentioned that the percentage saying they might have to contract their businesses has dropped from about 25% to 17%. What are the reasons that the optimists cite for their optimism? Then also, for those who remain pessimistic, what are the factors contributing to their view?

Witt: What we heard from those who are optimistic about the economy is strong underlying fundamentals that they’re seeing, a little anticipation of lower interest rates and easing concerns about inflation, along with the pro-growth policies of the current administration. On the downside, we continue to have concern about tariffs, unemployment, and policy uncertainty. Those are the reasons that respondents are citing in support of their positions.

Amato: Definitely lots in flux with tariffs, plenty of other news developments that affect the economy and people’s views. What are the decision-makers saying about the potential for recession and also specifically their concerns about inflation?

Witt: These are two factors that we’ve been tracking on an ongoing basis for some time now. And concern about inflation and anticipation of likelihood of a recession, both of those indicators are positive this quarter. In terms of recession, while we have about a third who tell us we’re already in a recession or headed in that direction, that number is down from 52% in the fourth quarter and 61% in the second quarter of 2025.

We’ve got just 36% this quarter. That’s a significant improvement in terms of thinking about a recession. Those concerned about inflation also dropped from 69% to only 56% this quarter. Inflation, as one of our consistent front runners on the top 10 list, fell to No. 5 this quarter, concern about inflation eased significantly as well.

Amato: Yeah, inflation has been a persistent challenge. It’s been often at or near the top of the list over the past few years, the past many quarters. What are some highlights of the other challenges that the respondents list for their businesses?

Witt: Domestic economic conditions has been doing the dance with inflation, as you said, the top two spots for several quarters now. Domestic economic conditions continue to be a concern at the top of the list and hiring and some of the other usual suspects. Cybersecurity returned to the top 10 list again this quarter. That makes its periodic appearance. I think cybersecurity is a big concern for business, especially with the advent of AI and cybersecurity perpetrators using AI as a portal into their systems.

Amato: Thank you for that rundown of the challenges. Where do things stand on those KPIs? First, revenue and profit projections and then also hiring.

Witt: Revenue and profit projections were both up, showing good improvement this quarter. On the hiring front, the need for employees and plans to hire remained pretty constant. Spending KPIs also held their own. IT’s always sort of in the lead, but we had good numbers. People that are planning to spend more on training and development this quarter. I always consider that to be a good thing if people are intent on developing their skills in their organization. That’s a pretty good solution to the hiring problems that continue to exist in organizations.

Amato: Yes, that’s the rundown on hiring and other spending and also revenue and profit projections. Remind the listeners, Ken: in general, what is the size range of these companies, I guess, by their annual revenue?

Witt: We got about 73% of respondents are in privately owned companies and only 6% are in publicly listed companies. We’ve got about 10% of our companies are $1 billion or more [in revenues], and the balance is roughly split between companies with $50 million to a billion in revenues and 45% $10 million to $50 million and under $10 million. Ten million to $50 million is like a third of our companies, so that’s the sweet spot for our respondents.

Amato: It’s not a ton of absolutely huge companies, more in the midsize range I’d say overall. Anything else as we close out this quarterly discussion on the survey? Again, we’re recording March 3. These results are posted March 5. What are you looking for as we look forward to the second quarter?

Witt: Well, I think there’s a lot in the news as I said when I opened the podcast, and I think we’ll have to wait and see what the impact of tariffs and the response to tariffs is and also what’s going on on the geopolitical front in the Middle East.

Amato: A reminder also we’ll post our news article with coverage of that survey in the show notes for this episode. Ken Witt, thanks for being on the Journal of Accountancy podcast.

Witt: You’re welcome.