With recession fears on the wane, business executives reported their highest level of optimism about the U.S. economy's prospects since the third quarter of 2021, according to the first-quarter AICPA & CIMA Economic Outlook Survey. The survey 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.

Inflation still remains a top concern but the specter of recession has diminished substantially since last year. Only 19% of business executives said they expect a recession in 2024, down from 41% last quarter. Projections for key performance indicators over the next 12 months also saw a sharp uptick: Profit expectations for that period are now 1.4%, the highest level since early 2022, while revenue growth is expected to be 2.6%, up from 1.8% last quarter.

Some 43% of business executives said they were optimistic about the U.S. economy over the next 12 months, up from 24% last quarter. Sentiment had dropped to as low as 14% in the second quarter last year. Survey respondents' view of their own organizations' outlook also rose, with 49% expressing optimism compared to 43% last quarter.

"We saw across-the-board increases in sentiment in the survey this quarter," said Tom Hood, AICPA & CIMA's executive vice president for business engagement and growth. "In recent months, there's been a disconnect between U.S. economic indicators – which have been largely positive on growth, unemployment and declining inflation – and the perception of how the economy is faring. This quarter looks like a bit of a reset."

The hiring outlook remains strong, and business executives cite "availability of skilled personnel" as their No. 3 concern after inflation and employee and benefit costs. Some 37% of business executives said they have too few employees, with 22% saying they were looking to hire immediately and 15% saying they were hesitant to recruit due to uncertainty.

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 February employment report, scheduled for release tomorrow, looks back on the previous month's hiring trends.

Other key findings of the survey:

• A bare majority (51%) of business executives say their companies plan to expand over the next 12 months, up slightly from 48% last quarter.
• Raw material costs were the one inflationary category that saw an increase over last quarter. "Materials, supplies and equipment costs" is now the No. 5 top concern for businesses – it wasn't in the top 10 last quarter.
• 85% of survey respondents said their companies had not engaged in significant layoffs recently.

Methodology

The first-quarter AICPA & CIMA Economic Outlook Survey was conducted from Feb. 6-28, 2024, and included 275 qualified responses from CPAs and Chartered Global Management Accountants (CGMAs) 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.