CPA business executives’ optimism about the 12-month outlook for the US economy has dropped slightly, but all market indicators are higher year-over-year, according to the latest economic forecast from the American Institute of CPAs (AICPA).
The AICPA Economic Outlook Survey tracks the hiring and business-related expectations of CPAs in executive and management positions for the year ahead.
The second-quarter 2017 survey revealed that the number of senior-level CPA executives who are optimistic about the economy fell from a 13-year high of 69 percent in the first quarter to 64 percent.
Organizational optimism dropped from 66 percent in the first quarter to 64 percent, while the percentage of companies with expansion plans fell from 67 percent to 64 percent.
As for hiring, 40 percent of respondents said they needed more employees, with 24 percent expecting to hire immediately, up from 19 percent who said that at this time last year.
Still, there’s a “growing perception of tightness in the labor market,” the survey states. Respondents indicated that “availability of skilled personnel” was their second most-pressing challenge, while “staff turnover” was their sixth-biggest challenge. In the first quarter, availability of skilled personnel and staff turnover were ranked No. 3 and No. 9, respectively.
“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,” Arleen Thomas, CPA, CGMA, managing director of Americas Market, Global Offerings & CGMA Exam, Management Accounting for the Association of International Certified Professional Accountants, said in a prepared statement. “That sets the stage for a competitive hiring situation and potentially higher salary and recruitment costs for companies.”
The CPA Outlook Index, which measures executives’ expectations in nine economic indicators, fell by a single point in the second quarter to 75.
The overall index remains below a post-recession high of 78 set in the fourth quarter of 2014.
However, all nine economic indicators are up over last year, with many only down slightly compared to the first quarter.
- US economic optimism: Up 18 points year-over-year; down two points from the first quarter.
- Organizational optimism: Up eight points year-over-year; down one point from the first quarter.
- Expansion plans: Up seven points year-over-year; down one point from the first quarter.
- Revenue: Up five points year-over-year; down two points from the first quarter.
- Profits: Up 11 points year-over-year; down two points from the first quarter.
- Employment: Up nine points year-over-year; up one point from the first quarter.
- IT spending: Up four points year-over-year; up two points from the first quarter.
- Other capital spending: Up two points year-over-year; up one point from the first quarter.
- Training and development: Up seven points year-over-year; no change from the first quarter.
Other key survey findings include:
- Sixteen percent of CPA executives expect the Trump administration’s proposal to lower US corporate income taxes to be signed into law this year, while another 33 percent expect it to be enacted before the 2018 midterm elections.
- Twenty-four percent of respondents said a corporate income tax rate reduction to the 15 to 20 percent range would be “significantly positive” for their company’s bottom line. Overall, 60 percent said a lower tax rate would be positive to some degree, compared to 51 percent last quarter.
- Forty-six percent of CPA executives said the top category for investment of potential tax savings from a corporate rate reduction is increased capital expenditures.
- Revenue and profit expectations fell compared to last quarter. CPA executives now expect revenue growth of 3.9 percent over the next 12 months, down from 4.3 percent in the first quarter. Profits are expected to grow 3.2 percent, down from 3.5 percent last quarter.
- Healthcare cost projections fell from 5.6 percent in the first quarter to 5.5 percent. That’s a drop from 6.1 percent in the fourth quarter of 2016.
- IT remains the strongest category for planned spending over the coming year, with an expected growth rate of 3.2 percent.