Economic confidence increases, but businesses pull back on spending

Economic confidence improved modestly in the third quarter, but businesses still pulled back on spending amid uncertainty, according to a new survey.

The American Institute of CPAs' third-quarter outlook survey, which polled CEOs, CFOs, controllers and other CPAs in executives or senior management roles, found that optimism about the U.S. economy rose four points, from 32% in the second quarter to 36% in the third quarter. Optimism regarding the global economy also improved by five points, from 19% to 24%. 

Confidence in executives' own organizations remained steady at 48%, compared to 49% last quarter. However, their growth plans became more hesitant, with 49% saying they expected to expand over the next 12 months, down from 54%. In the same vein, projected spending on IT, capital investments, training and development also softened from prior-quarter levels.

"The third-quarter results reflect a business community that remains resilient despite ongoing economic headwinds," Tom Hood, executive vice president of business engagement and growth at the Association of International CPAs, the alliance formed by AICPA and CIMA, said in a statement. "Confidence improved this quarter, but organizations continue to take a disciplined approach to investment and growth as they monitor inflation, costs and broader market conditions."

Inflation was the top concern among respondents. Nearly eight in 10 respondents said inflation poses a greater risk to their business than deflation, with labor costs, materials costs, energy prices and interest rates cited as key inflationary pressures. Domestic political leadership and the availability of skilled personnel remained among the top challenges, while cybersecurity and regulatory requirements moved up on the list of concerns.

Hiring sentiment also improved during the quarter. The percentage of executives reporting they have too few employees rose from 28% to 33%, while more organizations indicated plans to hire and relatively few reported hesitation about adding staff. In contrast, 53% of respondents said they have the right number of employees.

"The hiring data provides one of the clearest signs of resilience in this quarter's survey," Hood said. "While talent challenges persist, more organizations are moving ahead with hiring plans, suggesting continued confidence in underlying business demand."