Business executives are taking a more cautious view of the U.S. economy and their own company’s growth prospects after two straight quarters of exuberant optimism, 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.

Seventy-four percent of business executives said they were optimistic about the economy over the next 12 months, down five percentage points from last quarter. Part of the drop-off was due to concerns about trade and political uncertainty, survey respondents said. Optimism about their own company’s outlook slipped a percentage point to 70 percent. Both sentiments fall in the uppermost range of post-Great Recession assessments.

Survey respondents also trimmed their expectations for profit and revenue growth over the next 12 months. Profit growth estimates slipped from 4.4 percent last quarter to four percent, while revenue growth projections eased from five percent to 4.8 percent.

“Despite their more tempered views on growth, business executives still see a strong hiring picture over the next year,” 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. “Labor market tightness continues to be a concern, with companies encountering difficulty in recruiting candidates with the right skills.”

The number of employers who said they planned to hire immediately rose three percentage points to 30 percent in the quarter. Another 13 percent said they had too few employees but were hesitant to hire, down a point from last quarter. Overall, 48 percent of business executives said their companies currently have the right number of employees. Still, “availability of skilled personnel” remained the No. 1 challenge for businesses for the fourth quarter in a row.

The AICPA 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 May employment report looks back on the previous month’s hiring trends.

The CPA Outlook Index—a comprehensive gauge of executive sentiment within the AICPA survey— dropped two points in the second quarter to 79. 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 the index components were down or flat this quarter, except for employment, which rose a point.

Other key findings of the survey:

• Inflation concerns, which jumped sharply last quarter, remained unchanged.
• Technology showed surprising weakness in sector optimism, dropping from 80 percent last quarter to 69 percent. Hiring expectations for the industry also fell from 2.5 percent anticipated growth over the next 12 months to 2.1 percent. Yet tech spending plans remained strong.
• The percentage of business executives who expect their company to expand in the coming year dropped from a post-recession high of 72 percent last quarter to 70 percent.
• After availability of skilled personnel, the No. 2 and No. 3 challenges for businesses were “regulatory requirements and changes” and “employee and benefits costs,” respectively.

The second-quarter AICPA Business and Industry Economic Outlook Survey was conducted May 8-23, 2018. It included 831 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.