Business executives who are also CPAs are increasingly concerned about trade conflicts and rising interest rates, according to a new survey by the American Institute of CPAs.
The quarterly AICPA Economic Outlook Survey polls CEOs, controllers and other CPAs who hold executive and senior management accounting roles within U.S. companies. For the second consecutive quarter this year, CPA executives are tempering their expectations about the U.S. economy amid concerns about the Trump administration’s trade policies. Nearly half the survey respondents foresee an unfavorable impact on their business from the administration’s tougher trade policies.
49 percent of the business executives polled predicted the impact of increased tariffs and tougher trade policies by the United States would probably be unfavorable for their business, while 4 percent indicated it would be favorable, and 44 percent said the trade policies would have a neutral or minimal impact. A slightly higher proportion of 48 percent said the increased tariffs and trade quotas from U.S. trading partners would have an unfavorable impact on their business. The AICPA closed the survey only a few days before the U.S. announced a trade deal with Mexico, however.
On the positive side, 68 percent of the survey respondents predicted the impact of the Tax Cuts and Jobs Act on their business would be favorable for the next 12 months. 23 percent indicated their outlook had become more favorable since the beginning of the year.
However, 57 percent of the poll respondents predicted that interest rate hikes would have an unfavorable impact on their business over the next 12 months, while 14 percent said the rate hikes would be favorable, and 29 percent had a neutral view.
Meanwhile, 69 percent of the business executives polled said they’re optimistic about the economy over the next 12 months. Still, that’s a drop of five percentage points from the second quarter of the year and 10 percentage points since the beginning of the year. Optimism about their own organization’s business outlook dipped one percentage point to 69 percent.
Expectations for profit and revenue growth in the year ahead rebounded after dipping in the second quarter. Profit growth estimates increased to 4.3 percent from 4 percent in the second quarter, while revenue growth expectations grew from 4.8 percent to 5 percent in the third quarter. The percentage of CPA business executives who anticipate their company will expand in the year ahead remained unchanged from the second quarter at 70 percent.
“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,” stated Arleen R. Thomas, managing director of Americas market, global offerings CGMA exam, management accounting for the Association of International Certified Professional Accountants. “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.”
The survey found that “availability of skilled personnel” remained the top challenge cited by the CPA executives for the fifth consecutive quarter. Overall, 46 percent of the respondents said their companies currently have the right number of employees. Of the 44 percent who said they have too few employees, only 12 percent indicated they’re reluctant to hire more personnel, a post-recession low, while 32 percent said they intend to hire immediately, a post-recession high.
After availability of skilled personnel, the No. 2 challenge for businesses cited by survey respondents was “regulatory requirements and changes” and No. 3 was “domestic competition.”