According to the AICPA & CIMA Economic Outlook Survey for the first quarter, US business leaders remain seriously concerned about the economy but have turned more optimistic on sales and earnings expectations and other key indicators for the year ahead.
The survey interviews chief executive officers, chief financial officers, controllers and other chartered accountants at US companies who hold senior and senior accounting positions.
Only 23% of executives said they were optimistic about the prospects for the US economy over the next 12 months. However, this represents a step up from last quarter, when just 12% agreed — the metric’s lowest level since early 2009. Inflation, rising interest rates and geopolitical concerns continue to weigh on the US outlook. Ninety percent of survey respondents said they were concerned about the impact of a recession, with 15 percent stating this.
Still, many indicators are pointing up this quarter:
- Executives expect modest earnings growth (0.6%) over the next 12 months, a move away from negative or zero growth expectations over the past two quarters. Likewise, 12-month sales growth forecasts are back on the rise, up from 2.1% expected last quarter to 2.6%
- Executives who expressed optimism about their own organizations’ prospects over the next 12 months rose from 35% to 47% quarter-over-quarter
- Most executives (52%) now say they expect their businesses to expand at least somewhat over the next 12 months, up from 47% last quarter. Companies with sales over $1 billion led this category by a wide margin (68% expect to expand).
The US sentiment picture remains strong, although there are some signs of softening. About 45 percent of executives say they have the right number of employees, up from 39 percent last quarter. Nine percent of executives said they had too many employees, up one percentage point from last quarter.
Almost a third of executives (32 percent) said they are taking action to reduce workforce costs. About 17 percent said they have imposed hiring freezes and stopped recruiting for open positions. Other strategies, used to a lesser extent, include layoffs, reduced shifts or hours, and increased outsourcing
“Although there is some moderation in demand for hiring, we are not seeing widespread layoffs – most companies are looking at transition strategies to protect their workforce options. In fact, a third of executives say they want to hire immediately, while ‘availability of qualified personnel’ remains a top concern, according to the survey,” said Tom Hood, AICPA & CIMA executive vice president of business engagement and growth. “This illustrates the unique pressures companies have been under over the past year, with so much uncertainty clouding financial modeling,”
The AICPA survey is a forward-looking indicator that tracks hiring and business-related expectations for the next 12 months. In comparison, the US Labor Department’s November jobs report, due out tomorrow, looks back at the previous month’s hiring trends.
Other important results of the survey:
- US CEOs’ 12-month outlook for the global economy also improved, with those who expressed pessimism falling to 48% now, from 72% last quarter.
- Inflation was the top concern for corporate executives for the sixth consecutive quarter. Skill availability and employee and benefit costs have swapped places and are now challenges #2 and #3, respectively.
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