U.S. business executives are more optimistic about prospects for the nation’s economy than at any time since 2004, according to the first-quarter Economic Outlook Survey from the American Institute of Certified Public Accountants, released Thursday.
“We saw a big jump in economic optimism following the election, and that has been reinforced and extended in our latest results,” Arleen Thomas, the AICPA’s managing director for the Americas and global offerings, said in a statement.
“Much of this positive sentiment is due to expectations of lower corporate taxes and reduced regulation under the new administration. I expect business executives will be monitoring progress on these goals closely.”
The survey was conducted Feb. 7 to Feb. 22 among 930 CPAs who hold leadership positions, such as chief financial officer or controller, in their companies.
The poll found that optimism about the 12-month outlook for the U.S. economy had risen to 69% from 62% in the fourth quarter, its highest level since it hit 71% 13 years ago.
In recent years, sentiment about the economy has been volatile, the AICPA said. A year ago, optimism was as low as 28%, but stood at 68% in the same quarter in 2015.
Business executives in the survey were upbeat about the outlook for their own companies in the coming year, with 66% expressing optimism, up from 61% last quarter and 44% a year ago.
One reason for this was rising expectations for profits and revenue, a trend that has accelerated over the past year, the AICPA said.
According to the AICPA, its survey is a forward-looking indicator that tracks hiring and business-related expectations for the next 12 months. As a point of comparison, the U.S. Department of Labor’s February employment report looks back on the previous month’s hiring trends.
Emplyers added 235,000 workers to their payrolls in February, according to the jobs report. A report released Wednesday said the market had expected growth of some 185,000 jobs, but noted that ADP and Moody’s Analytics projected private sector employment would skyrocket by 298,000 jobs.
The CPA Outlook Index, a gauge of executive sentiment within the AICPA survey, rose two points in the first quarter to 76.
The index is a composite of nine equally weighted survey measures set on a scale of 0 to 100, with 50 considered neutral and greater numbers signifying positive sentiment. The overall index remains below a post-recession high of 78 set in the fourth quarter of 2014.
Other Key Findings
Two-thirds of business executives polled said they expected some expansion at their companies in the coming year.
“Availability of skilled personnel” is a top-three concern for business executives as their perception of tightness in the labor market continues to grow, while “staff turnover” is now No. 9 on the list of concerns.
Fifty-one percent now said their companies planned to increase spending for skills training and staff development. Twenty-two percent of respondents reported that their organizations were ready to hire immediately, up two percentage points from last quarter. Most, however, said their companies had the right number of employees.
Although a big majority of respondents expected a substantial reduction in the federal corporate income tax to materialize, half said they did not think it would be enacted until at least 2018.
Eighteen percent said a cut to a range of 15% to 20% would have a significant effect on their bottom line, while 33% said it would have a moderate or slight one and 43% said it would have no effect.
The survey found that tax savings from a federal corporate income tax cut would most likely be deployed to capital expenses, not to new hiring.
Twelve-month profit growth expectations stand at 3.5% and for revenue growth at 4.3%, their highest level since the end of 2014.
Thirty-three percent of executives now list inflation as a concern, up from 28% last quarter and 14% a year ago.
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