The potential effects of trade and tariff policies and rising interest rates helped dampen U.S. business executives’ optimism about the American economy in the third quarter, according to the American Institute of CPAs’ latest economic outlook survey.

Sixty-nine percent of survey participants said they were optimistic about the economy over the next 12 months, down five percentage points from the second quarter and down 10 points from the start of the year.

Optimism about their own company’s outlook also slipped, down one point to 69%.

Still, both rates remained strong from a historical perspective, AICPA noted in a statement.

Expectations for profit and revenue growth over the next 12 months rebounded after a dip last quarter. Profit growth estimates rose to 4.3% from 4%, while revenue growth expectations grew from 4.8% to 5%.

“It’s unusual to see a decrease in U.S. economic optimism when key performance indicators such as profit and revenue are perceived to be on the rise,” Arleen Thomas, Americas managing director of CGMA global offerings at the Association of International Certified Professional Accountants, said in the statement.

“On the one hand, business executives are encouraged by the impact of federal tax reform and reduced regulation at home, but there is some concern about trade wars, interest rate hikes and other factors that could contribute to a global economic slowdown.”

For the fifth consecutive quarter, availability of skilled personnel was the top challenge for businesses, according to the survey. Overall, 46% of business executives said their companies currently had the right number of employees.

Of the 44% who reported having too few employees, only 12% said they were reluctant to hire, a post-recession low, while 32% said they planned to hire immediately, a post-recession high.

The AICPA survey, conducted midsummer, comprised 1,242 qualified responses from CPAs who hold leadership positions, such as chief financial officer or controller, in their companies.

The survey is a forward-looking indicator that tracks hiring and business-related expectations for the next 12 months. In comparison, the U.S. Labor Department’s employment report looks back on the previous month’s hiring trends. DOL released its August report on Sept. 7.

The CPA outlook index — a comprehensive gauge of executive sentiment within the AICPA survey — remained unchanged from the second quarter at 79. 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 biggest shift in index components in the third quarter was in U.S. economic optimism, which fell four points.

Other Findings

Forty-nine percent of business executives told pollsters that the likely effect of increased tariffs and tougher trade policies by the U.S. would be unfavorable for their business, while 44% said they would have a neutral or minimal effect.

Similarly, 48% of survey respondents said increased tariffs and trade quotas from U.S. trading partners would be unfavorable for their business. The survey concluded a few days before the U.S. announced a bilateral trade pact with Mexico.

Sixty-eight percent of respondents said they expected the effect of the tax overhaul on their business for the next 12 months to be favorable, with 23% saying their outlook had become more favorable since the start of the year.

Fifty-seven percent of business executives said interest rate hikes would be deleterious to their business over the next 12 months, while 29% held a neutral view.

The percentage of executives who expected their company to expand in the coming year remained unchanged from last quarter at 70%.

Rounding out the top five challenges for businesses, after availability of skilled personnel, were these:

  • Regulatory requirements/changes
  • Domestic competition
  • Employee and benefits costs
  • Materials/supplies/equipment costs

— Check out 6 Economic Predictions for Next 5 Years: Northern Trust on ThinkAdvisor.