Economic optimism still low but improving; concerns about inflation remain

 

After hitting a historic low at the end of 2022, the outlook for the U.S. economy rebounded somewhat in February 2023, but inflation remains a concern, according to the first-quarter Business and Industry Economic Outlook Survey released by AICPA & CIMA.

After hitting a historic low at the end of 2022, the outlook on the US economy rebounded somewhat in February 2023, but concern about inflation remains high, according to the first-quarter Business and Industry Economic Outlook Survey released Thursday by AICPA & CIMA, together as the Association of International Certified Professional Accountants.

The quarterly survey polled CPA decision-makers — primarily CFOs, CEOs, and controllers — about the global and US economies, current and projected challenges, business projections, and additional points of interest. The survey was conducted from 7 February to 1 March and received 438 responses.

Some respondents felt hopeful about the tempering of inflation, strong overall employment, and the continued demand for products — and that resulted in the 11-point jump in optimism to 23% from last quarter’s 12%. By comparison, 36% of respondents were optimistic about the US economy in the first quarter of 2022.

Inflation, interest rates, unfolding debt ceiling concerns, and the uncertainty from the US Federal Reserve’s intervention are cited as reasons not to share in the overall optimism. Respondents are feeling better about their businesses’ revenue projections, expansion plans, and future spending plans.

Revenue is now projected to increase 2.6%, up slightly from a 2.1% increase that was expected in 2022’s fourth quarter. Fifty-two per cent of respondents have plans to expand in some capacity, a slight increase from the previous quarter’s 47%. And respondents plan to spend a bit more on IT (3.1%), training (1.6%), and other capital (2.5%) — each receiving a tiny boost from the previous quarter.

Additionally, outlook on the global economy has improved — 48% of respondents are pessimistic, a drastic change from last quarter’s 72%. Even as outlook on the US economy slowly improves, inflation is the number one challenge, cited by 82% of respondents. While this is a three-point decrease since last quarter, inflation has polled as the top challenge for the last year.

Rounding out the top five challenges are the availability of skilled personnel, costs of employees and benefits, equipment and materials costs, and domestic economic conditions. Energy costs, once a recurring concern, dropped out of the top ten.

Respondents are still monitoring the effects of certain inflationary risk factors on their businesses. The potential impact of interest rates dropped from last quarter’s 20% to 11%. But more respondents share concern over labour costs — now 42%, up from 41% in the previous quarter — and the costs of raw materials — now 25%, up from 21% in the previous quarter.

Similar to last quarter, hiring remains strong. Last quarter, 17% of respondents wanted to fill employment gaps but were hesitant to hire. This quarter, only 11% are hesitant to hire new employees. Forty-five percent of respondents said they have the right number of employees — up from 39%. And in a one-point dip from last quarter, 33% said they have too few employees and plan to hire.

A lower percentage of businesses plan to contract operations: 20% this quarter, compared with 27% at the end of 2022.

 

Credit : https://www.fm-magazine.com/

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