Economy Worries Linger Among CPA Business Executives, AICPA Says

CPA business leaders’ optimism about the economy has dropped for the second straight quarter, as only about one-fourth expressed a positive outlook over the next 12 months, down from more than a third in the second quarter, according to the latest AICPA & CIMA Economic Outlook Survey.

The third-quarter 2024 survey includes 310 qualified responses from AICPA members holding executive and senior management accounting roles, including CEOs, CFOs, controllers, and other CPAs in U.S. companies.

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 dropped slightly from 22% to 19%, quarter over quarter.

Tom Hood

“Election years are always a volatile period and signals from the economy have been mixed lately,” Tom Hood, AICPA & CIMA’s executive vice president for business engagement and growth, said in a statement. “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 CPA business leaders said they were 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.

Table courtesy of the AICPA & CIMA

The AICPA survey is a forward-looking indicator that tracks hiring and business-related expectations for the next 12 months. In comparison, the U.S. Department of Labor’s August employment report, scheduled for release tomorrow, looks back on the previous month’s hiring trends.

Other key findings of the survey include:

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%.
CPA 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 seven points to 27%.
Sixty-nine percent of CPA business leaders said an anticipated interest rate cut would have at least a moderately favorable impact on their organization, with almost one in five 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 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 two 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 third-quarter AICPA & CIMA Economic Outlook Survey was conducted from Aug. 6 to 27, 2024.