After feeling extremely optimistic about the U.S. economy in the first quarter of this year, that sentiment among CPA business decision makers has fallen in Q2 due to concerns about ongoing inflation, interest rates, and election-year uncertainty, according to the most recent AICPA & CIMA Economic Outlook Survey.

The second-quarter 2024 survey includes 315 qualified responses from AICPA members holding executive positions in business and industry, including CEOs, CFOs, controllers, and other CPAs in U.S. companies.

Approximately 35% of CPA business executives said they were optimistic about the economy’s prospects over the next 12 months, down from 43% last quarter. The overall trend over the past year has been positive—optimism stood at only 14% a year ago—but that optimism continues to seesaw wildly quarter over quarter.

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Graph courtesy of the AICPA.

Drivers of the more pessimistic outlook about the economy include continuing geopolitical issues, being in an election year, and political concerns. Pessimists continued to cite uncertainty about interest rates and ongoing inflation, while optimists cited the possibility of an interest rate reduction, as well as economic and market resiliency, according to the AICPA.

Tom Hood

“There are conflicting signals in our latest results,” Tom Hood, AICPA & CIMA’s executive vice president for business engagement and growth, said in a statement. “On the one hand, inflation worries are about where they were a year ago, but over the course of the past year we saw a dip and then a steady rise in concern. So there’s a perception of worsening conditions. On the other hand, revenue and profit expectations have been ticking up in recent quarters, which signals underlying strength in the economy. Our observation is the mix of confusing or conflicting stats is causing this ongoing sideways movement across these indicators.”

Election-year uncertainty in Q2 caused “domestic political leadership” to move up three spots to No. 4 on the list of CPA business executives’ top concerns. Their top three concerns—inflation, employee and benefit costs, and availability of skilled personnel—remain unchanged from last quarter.

The hiring outlook remains strong but shows some signs of softening, Some 29% of CPA business executives said they have too few employees, with 16% saying they were looking to hire immediately and 13% saying they were hesitant to recruit due to uncertainty. That’s a shift from last quarter when 37% of respondents said they had too few employees, and 22% said they were looking to hire immediately.

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 May employment report, scheduled for release tomorrow, looks back on the previous month’s hiring trends.

Other key findings of the survey:

Profit expectations for the next 12 months are now +1.5%, up a tick from last quarter, while revenue growth is expected to be 2.9%, more than double what it was projected a year ago.
Business executives’ optimism about their own organizations’ prospects over the next 12 months fell slightly from 49% to 48%, quarter over quarter.
Some 54% of business executives say their companies plan to expand over the next 12 months, up from 51% last quarter.

The second-quarter AICPA & CIMA Economic Outlook Survey was conducted from May 7 to 28, 2024.