Business executives are taking a more conservative view of what had been bullish optimism about both the U.S. economy and prospects for their own companies earlier this year, according to the second-quarter AICPA Economic Outlook Survey, which 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.

Those who expressed optimism about the 12-month outlook for the U.S. economy dropped from 69 percent last quarter – a 13-year high for the survey – to 64 percent. Respondents also pulled back slightly on optimism about their own company’s prospects (66 percent to 64 percent, quarter over quarter) and their organization’s plans for expansion (67 percent to 64 percent). Optimists and pessimists alike noted more uncertainty in the economic climate.

On the hiring front, some 40 percent of business executives said they had too few employees. Nearly one-in-four (24 percent) said they planned to hire immediately, a significant improvement from the 19 percent expressing that view a year ago. Another 16 percent said they need more staff, but were hesitant to hire.

There is a growing perception of tightness in the labor market. Asked to list their top challenges, business executives put “availability of skilled personnel” at No. 2 on the list and “staff turnover” at No. 6. Those categories were No. 3 and No. 9, respectively, last quarter.

“Staff turnover has been a rising concern since the end of 2016, and we’ve seen steady perceptions of a shrinking talent pool over several quarters,” said Arleen R. Thomas, CPA, CGMA, managing director of Americas Market, Global Offerings & CGMA Exam, Management Accounting for the Association of International Certified Professional Accountants. “That sets the stage for a competitive hiring situation and potentially higher salary and recruitment costs for companies.”

The AICPA survey is a forward-looking indicator that tracks hiring and business-related expectations for the next 12 months. As a point of comparison, the U.S. Department of Labor’s May employment report, scheduled for release tomorrow, looks back on the previous month’s hiring trends.

The CPA Outlook Index—a comprehensive gauge of executive sentiment within the AICPA survey— fell a single point in the second quarter to 75. 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 overall index remains below a post-recession high of 78 set in the fourth quarter of 2014. 

Other key findings of the survey:

• Sixteen percent of business executives said they expect the Trump Administration’s proposal to lower federal corporate income taxes will be signed into law this year, while another 33 percent expect it to be enacted before the 2018 midterm elections.
• Twenty-four percent of business executives said a reduction in the rate of federal corporate income taxes to the 15-20% range would be “significantly positive” for their company’s bottom line, compared to 18 percent last quarter. Overall, 60 percent said a lower tax rate would be positive to some degree, compared to 51 percent last quarter.
• The top category for investment of potential tax savings from a corporate rate reduction is increased capital expenditures (46 percent).
• Revenue and profit expectations for the coming year fell, quarter over quarter. Business executives now expect revenue growth of 3.9 percent over the next 12 months, down from 4.3 percent. Profits are expected to grow 3.2 percent, down from 3.5 percent last quarter.
• IT remains the strongest category for planned spending over the coming year, with an expected growth rate of 3.2 percent

The second-quarter AICPA Business and Industry Economic Outlook Survey was conducted May 2-17, 2017, and included 726 qualified responses from CPAs who hold leadership positions, such as chief financial officer or controller, in their companies. The overall margin of error is less than 3 percentage points. A copy of the report can be found on aicpa.org.