Execs Regain Optimism but Trim Profit Outlook

NEW YORK– Business executives regained some optimism about the U.S. economy after a sharp decline in the third quarter, yet continue to rein in forecasts for profit and revenue growth, according to the fourth-quarter economic outlook survey conducted by the American Society of Certified Public Accountants.

The survey polls chief executive officers, chief financial officers, controllers and other certified public accountants in U.S. companies who hold executive and senior management accounting roles.

Some 50% of survey takers expressed optimism about the U.S. economy’s overall outlook over the next 12 months, up from 42% last quarter. That’s still low for the post-recession period – positive sentiment on the U.S. economy had been as high as 79% in early 2018.

U.S. executives’ outlook on the global economy, while far more pessimistic, also improved in the quarter. Some 28% expressed optimism, up four percentage points from last quarter.

Profit growth over the next 12 months is now expected to be 2.7%, down from 2.8% last quarter and significantly below the outlook of 4.3% a year ago. Similarly, 12-month revenue growth expectations dropped a tenth of a percentage point to 3.4%, quarter over quarter. That’s down from five percent a year ago.

“We saw a sharp drop in U.S. economic optimism in the third quarter due to the U.S.-China trade war really driving uncertainty, so this quarter represents a correction of sorts, with prospects of a reasonable outcome,” said Ash Noah, AICPA vice president and managing director. “But there also is a continued sense of unease and uncertainty about trade and growth prospects, and we’re seeing that in some of these more conservative forecasts.”

Hiring plans were a relatively bright spot this quarter. Some 43% of business executives said they had too few employees, compared to 38% last quarter. Of that cohort, 28% said they planned to hire immediately and 15% said they needed employees but were hesitant to hire. The number of respondents who said their companies had too many employees dropped a percentage point to eight percent, quarter over quarter.

Other key findings of the survey: 

• The percentage of U.S. executives who expressed optimism about their own company’s prospects over the next 12 months remained unchanged at 58%, quarter over quarter.
• Survey respondents who said they expect their organizations to expand in the coming year fell two percentage points to 59% and has dropped 8% year over year. 
• Availability of skilled personnel remains the top challenge for businesses, a position it has occupied since the third quarter of 2017. 
  The fourth-quarter AICPA Business and Industry Economic Outlook Survey was conducted from Oct. 31 to Nov. 20 and included 907 qualified responses from CPAs who hold leadership positions, such as chief financial officer or controller, in their companies. The overall margin of error is less than 3 percentage points.

SOURCE: American Institute of Certified Public Accountants

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