A change in optimism about the US economy

The potential for less regulation is one factor driving optimism among CPA decision-makers in a quarterly survey, according to Ken Witt, CPA, CGMA, AICPA & CIMA associate director–Management Accounting Research and Development.

Witt joined the JofA podcast to discuss fourth-quarter results of the Business and Industry Economic Outlook Survey — statistics that were dramatically different from the third quarter.

The executives are mostly optimistic about the domestic economy in 2025. They also have a brighter outlook as it relates to their own organizations, although that increase since the third quarter was more muted.

What you’ll learn from this episode:

• A breakdown of the quarter-over-quarter change in optimism.
• What challenge returned to its familiar top spot in this quarter’s survey.
• The reasons that optimists and pessimists feel the way they do, according to Witt’s analysis.
• The hiring outlook for 2025.

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 back to the Journal of Accountancy podcast. This is Neil Amato with the JofA. It is early December. It’s time again to look at the quarterly results from the Business and Industry Economic Outlook Survey. We’re looking at the fourth-quarter results today, Thursday, Dec. 5. There’s a turnaround in this quarter’s results, and I guess in some ways, you could say it’s a surprise, in some ways you could say it’s not a surprise.

Back on the show to discuss these results is survey guru Ken Witt. He’s associate director–Management Accounting Research and Development for AICPA & CIMA. Ken, welcome back to the podcast. We’re glad to have you on. Tell us first, I guess, what are some of the highlights to you from this quarter’s results?

Ken Witt: Sure, Neil. Good to be back. Well, we launched this survey this quarter on the day following the elections, and I would say that the results of our survey certainly reflect the results of our election. Perhaps most notably, domestic political leadership, which has ranged from the No. 4 to the No. 7 spot on the top 10 challenges list over the past three quarters, disappeared entirely from the top 10 altogether this quarter, so that’s reflected in the results. Optimism about the U.S. economy jumped from only 26% being optimistic about the U.S. economy in the third quarter to now two-thirds optimistic, 67% say they are optimistic about the economy overall.

Interestingly, optimism about the global economy also improved from 19% to 41%. Optimism about our members own organizations, which I always consider to be the more reliable indicator of what’s really going on, also improved, but in a bit less dramatic fashion. Organization optimism improved from 41% to now 53% saying they are optimistic about their own company prospects, along with those optimistic outlook for the company’s own organization plans, the expansion plans also followed suit. Now we have the number of companies having plans to expand their business increasing from 44% to 57%.

Amato: It’s rare that domestic economy optimism is higher than own company optimism. I think that’s an interesting point in this because generally own company optimism had been ahead the previous quarter, that was the case, both improved, but the overall domestic economy optimism improved more. I don’t know if you have any more to add on that difference.

Witt: That’s true. As I say, I think there’s a lot more fluctuation in the indicator for the U.S. economy, and we’ve seen it in the past also really skyrocket. But usually the optimism about the members’ own organizations follow suit, but just with less fluctuation variation.

Amato: Now, speaking of some own-company results in the survey, the KPIs, specifically revenue and profit projections, again, the respondents are asked to give the projected increase they see for the coming 12 months in revenue and profit. What’s new on that front with this quarter’s results?

Witt: Well, if you recall in our third-quarter survey, our survey-within-the-survey question was about the impact of election-year uncertainty on business planning and forecasting. At that time, we had 46% of our respondents tell us that the uncertainty was having at least some moderate impact on their planning, and it was revenue projections that were most likely to be taking a hit. What we are seeing now in this quarter is maybe not a surprise, with revenue increases being projected at 3.3% rate of increase versus only 1.5% last quarter. Similarly, profit projections also improved from 0.2% to 2.2%, a full 2-point increase quarter to quarter.

Amato: That’s great. It’s definitely a big improvement. Another thing that improved: hiring plans, the hiring outlook. What does that look like now?

Witt: Yes. Hiring plans also improved. Now we have 38% of organizations of all sizes now need employees. While we still have 18% who continue to be hesitant to hire given the circumstances, we now have 20% of those companies with plans to hire, which that number is up from 14% in the third quarter, so a little more strength in the hiring plans.

That said, while inflation recovered the top spot in the top 10 list of challenges, staffing issues continue to be significant with employee and benefit costs at No. 2, availability of skilled personnel at No. 3, and staff turnover at No. 8.

Amato: Those challenges, I mean, inflation is still persistent. It’s back to No. 1 and then the staffing issues you mentioned at two and three and also at eight. One thing I want to ask about is why the optimists and why the pessimists felt the way they did? What did they say about that?

Witt: I think for the most part, the optimists indicated that they were relieved that there may be less regulation under this new administration than the alternative administration, and the pessimists on the other side expressed concern primarily about tariffs and the impact that those might have on the economy.

Amato: Ken, this has been a good rundown, an express version. As always, we like to keep it fast-moving. Anything else you’d like to add in closing?

Witt: Well, I think a couple of things. One is that cybersecurity hit the top 10 list [of challenges] for the first time, and so I think that we’re seeing is an ever-present concern these days. I think looking ahead, you always ask me about what to expect, and I say, I’m not sure what to expect, but we have much to look forward to in terms of a new administration and what the impact of that will be, and also artificial intelligence is becoming a big thing, especially for our profession. But overall, for the economy, I think we’ll have to see what the impact of AI is going forward.

Amato: Ken Witt, thank you very much, and, to the listeners, thanks again for listening to the JofA podcast.