Business executives in a new survey expressed optimism about the U.S. economy, but showed increased concern about inflation, the American Institute of CPAs reported Thursday.

Seventy-nine percent of business leaders who responded to the survey said they were upbeat about prospects for the economy, up from last quarter’s post-recession high of 74%. The report noted that optimism levels were as low as 28% in early 2016.

Respondents’ view of their own companies’ outlook over the next 12 months also set a post-recession record, with 71% expressing optimism.

The poll was conducted Feb. 6 to 21 among 818 CPAs who hold leadership positions, such as chief financial officer or controller, in their companies.

The new survey found respondents’ increased concern about inflation particularly acute, with 49% saying they considered it a greater risk than deflation over the next six months, up from 27% in the fourth quarter. In the previous five years, the report said, this figure had never exceeded 38%.

Respondents cited — in order — labor costs, raw material costs and interest rate hikes as the chief inflationary risk factors.

“Business executives are drawing a lot of confidence from current economic indicators, and cite federal tax reform and deregulation as two factors in their improved outlook over the next year,” Arleen Thomas, AICPA’s managing director of Americas and global offerings, said in a statement.

“At the same time, we’re seeing an uptick in concerns often associated with a hot economy, from talent pool issues to rising inflation fears.”

On the job front, half of respondents said their companies had the right number of employees. Hiring plans continued to improve from the fourth quarter, with 27% of companies polled saying they planned to fill positions immediately, up two percentage points. Another 14% acknowledged they had too few employees, but said they were hesitant to hire, up one point.

Finding the right candidates remained the No. 1 challenge for businesses for the third quarter in a row, according to the report.

The AICPA noted that its quarterly survey is a forward-looking indicator that tracks hiring and business-related expectations for the next 12 months, whereas the U.S. Department of Labor’s employment report looks back on the previous month’s hiring trends.

The CPA Outlook Index — a comprehensive gauge of executive sentiment within the AICPA survey — rose two points in the fourth quarter to 81, a post-recession high.

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.

Other Findings

Three out of four business executives told pollsters they had at least slight concerns about potential interest rate hikes. However, only one in 10 saw this as a major concern.

Asked to quantify the federal tax reform law’s effect on their earnings in 2018, half of respondents — excluding those from the not-for-profit sector — said they expected the effect to be positive, while more than a third said they anticipated no effect.

As to how companies would deploy any tax savings from federal tax reform:

  • Increased capital spending, 29%
  • Pay down debt, 17%
  • Hire more workers, 13%
  • Issue a dividend to investors, 10%
  • Acquire or merge with another company, 5%
  • Buy back stock, 3%
  • Hire more part-time workers, 2%

Seventy-four percent of business executives said their companies had not yet passed on tax savings to workers in the form of pay increases or benefit changes. Of those that had, 12% increased salaries or wages and some 5% offered a one-time bonus.

For their part, blue-collar workers are underwhelmed by the effects of the tax cuts on their take-home pay, The New York Times reported Wednesday.

The AICPA survey found that the percentage of business executives who expected their company to expand in the coming year had increased from 71% in the previous quarter to 72%, a post-recession high.

The survey results also showed that revenue and profit expectations for the next 12 months had grown every quarter over the past year. In the latest poll, they stood at 5% and 4.4%, respectively.

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