Business executives’ optimism about the U.S. economy in the third quarter sank to its lowest level in three years, the American Institute of CPAs reported Thursday.
Forty-two percent of business leaders in a new survey said they were optimistic about the economy’s outlook over the next 12 months, down from 57% who expressed that view in the previous three quarters.
The report noted that positive sentiment about the economy had soared to 79% in early 2018, and had not dipped below 50% since the 2016 third quarter, when it hit 38%.
The third-quarter survey was conducted from July 30 to Aug. 21 among 755 CPAs who hold leadership positions, such as chief financial officer or controller, in their companies.
Forty-five percent of respondents blamed trade conflicts for some negative effect on their business over the past 12 months; 16% said this had been significant or moderate.
And they did not expect things to improve, with 54% anticipating negative global trade effects on their business over the next 12 months compared with the past year.
“Global trade tensions have been an issue for some time now, but it’s clear business executives are more concerned about growing volatility and risk in this area,” Bob Sannerud, chair of the Association of International CPAs’ Americas regional advisory panel and chief financial officer of Life Link, said in a statement.
“We’re seeing that uncertainty weighing on spending and hiring plans over the past few quarters.”
Business executives in the survey were more positive about their own companies’ outlooks and expansion plans than about the U.S. and global economies in general, but these categories had also fallen to three-year lows, according to the report.
Profit and revenue growth expectations for the next 12 months were 2.8% and 4.2%, respectively, both down 1.5 percentage points from a year ago and at their lowest level since the third quarter of 2016.
Fifty-eight percent of U.S. executives expressed optimism about their own company’s prospects over the next 12 months, down four points quarter over quarter.
Survey respondents who said they expected their organizations to expand in the coming year also fell two points to 61%.
Business leaders continued to cite availability of skilled personnel as the top challenge for businesses, a position it has occupied for two years.
The number of survey takers who said their companies had too few employees dropped from 44% to 38% in the third quarter, while those who said they had too many employees edged up. Half of respondents said their businesses had the right number of employees.
Survey respondents cited domestic economic conditions and domestic political leadership as the second and third biggest challenges for their businesses.
The AICPA noted that its 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 on Friday, looks back on the previous month’s hiring trends.
According to the report, the CPA Outlook Index, a gauge of executive sentiment within the AICPA survey, now stands at 72, down three points from last quarter.
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. All components of the index fell or were flat in the third quarter, with the biggest drop due to U.S. economic sentiment.
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