Business Executives Remain Positive on US Economy

With the markets back in correction territory, it makes sense that business executives’ outlook on the U.S. economy fell sharply as well in a recent survey. However, these business executives continue to hold strongly positive views of their own companies’ prospects when looking ahead.

Note that this survey polls chief executive officers, chief financial officers, controllers and other certified public accountants in U.S. companies who hold executive and senior management accounting roles to assess how they currently view the U.S. economy and where it stands to go from here. The survey was conducted after the recent midterm elections.

About 57% of survey respondents expressed optimism about the U.S. economy over the next 12 months, which is down 12 percentage points from the past quarter and a steep decline from the post-recession high of 79% set at the start of the year. Trade issues and rising interest rates were cited as factors for the decline this quarter, along with concern about the U.S. deficit and underlying issues such as corporate and personal debt levels.

Business executives’ outlook for their own companies held relatively firm at 69%, a decline of a single percentage point from last quarter. In a similar vein, survey respondents who said they expected their organizations to expand in the next 12 months fell from 70% to 67%, a rate that remains high from a historical perspective.

Arleen R. Thomas, CPA, CGMA, managing director of Americas and CGMA Global Offerings for the Association of International Certified Professional Accountants, commented:

We see continued concern about potential trade conflicts and the impact of interest rate changes. Still, even though business executives are taking a more tempered view of revenue and profit growth in the coming year and expect to rein in spending in some areas, they maintain fairly broad optimism about business expansion and their own companies’ prospects.

Other key findings of the survey included:

  • Expectations for profit and revenue growth over the next 12 months were pared back significantly from last quarter. Profit growth estimates fell from 4.3% last quarter to 3.4%, the lowest rate since the second quarter of 2017, while revenue growth expectations dropped from 5% to 4.3%.
  • Despite sentiment from many respondents about the need for pay increases to combat the tight labor market, overall expectations for increases in salary and benefit costs over the next 12 months tailed off slightly in the quarter from 2.8% to 2.6%. That interrupts a steady rise tracking back to the first quarter of 2016.
  • Inflation worries remained consistent with last quarter, with almost half (49%) of respondents expressing concern. Labor costs are seen as the biggest potential contributor to that concern.