Survey: Inflation Worries Ease, but Executives Still Pessimistic

NEW YORK – For most of the past year, business executives listed inflation as their top concern. Yet easing inflation hasn’t improved their outlook.

Only a quarter or so expressed optimism about prospects for the U.S. economy over the next 12 months, down from more than a third last quarter, according to the AICPA & CIMA Economic Outlook Survey, a forward-looking indicator that tracks hiring and business-related expectations for the next 12 months.

The quarterly 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 26% of business executives said they were optimistic about the economy’s prospects over the next 12 months, down from 35% last quarter and 29% a year ago. Those expressing optimism about the global economy also fell slightly from 22% to 19%, quarter over quarter.

“Election years are always a volatile period, and signals from the economy have been mixed lately,” said Tom Hood, AICPA & CIMA’s executive vice president for business engagement and growth. “There’s less worry about inflationary pressures, and we have the likelihood of interest rate cuts by the Federal Reserve. But geopolitical concerns continue to weigh on global commerce. We’ve seen downward revisions to strong U.S. job growth figures, and many business leaders are concerned about rising labor costs, which is making the hiring outlook worse than it had been earlier this year.”

Some 57% of business executives said they are worried about inflation over the next six months, down sharply from 75% last quarter. Inflation, the top concern listed within the survey over the past three quarters, fell to No. 2 this quarter behind employee and benefit costs.

Other key findings of the survey:

• Revenue and profit expectations for the next 12 months both fell. Revenue growth is now expected to be 1.9%, down from a 2.9% projection last quarter. Profit projections fell from 1.5% last quarter to 0.2%.

• Business executives who said they were optimistic about their own organization’s outlook over the next 12 months fell from 48% to 41%, quarter over quarter.

• Only 44% of survey respondents expect their businesses to expand over the next 12 months, down from 53% last quarter. The percentage of those who foresee a contraction rose 7 points to 27%.

• Sixty-nine percent of business executives said an anticipated interest rate cut would have at least a moderately favorable impact on their business, with almost 1 in 5 saying it would be very favorable. The downside: It could impact investment portfolios.

• Fifty-four percent of respondents said the election uncertainty has had limited or no impact on their business forecasting. Twelve percent said it had had a significant impact on forecasting, and 34% said it had a moderate impact. Revenue projection was most likely to be impacted.

• Some 13% of business executives said they had too many employees, up 2 percentage points from last quarter. Those who said they had too few employees remained steady at 29%, but the percentage of those who were hesitant to hire despite being shorthanded rose from 13% to 15%, quarter over quarter.

The full report is available HERE.

Published by The Business Journal, Youngstown, Ohio.