Business executives and other financial leaders' optimism concerning the U.S. economy has fallen to its lowest level in more than three years, according to the first quarter AICPA Economic Outlook Survey, released on Thursday. The Survey polls various CEOs, CFOs, controllers and other CPAs in U.S. companies who hold executive and senior management accounting roles.

Approximately 28 percent of the Survey respondents considered themselves as “optimistic” or “very optimistic” about prospects for the U.S. economy over the next 12 months, down 17 percent from last quarter and 40 percent from just a year ago. Comparatively, 34 percent claimed they were “pessimistic” or “very pessimistic,” the highest ratio since 2012. The rest of respondents were neutral.

“For the first time since early 2013, domestic economic conditions have replaced regulatory concerns as the top perceived challenge for business executives,” stated Valerie Rainey, senior vice president and chief financial officer of CMA CGM (America) and chair of the AICPA’s Business & Industry Executive Committee. “Survey takers say they’re worried about slow growth, stock market volatility, the impact of low oil and commodity prices and upheaval in the global economy.”

The CPA Outlook Index—a gauge of executive sentiment within the AICPA survey— fell six points in the first quarter to 63, the fifth consecutive drop from a post-recession high of 78 in the fourth quarter of 2014. 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 categories of the index fell in the past quarter, and are down year-over-year as well.

Other findings from the Q1 survey include:

  • A softness in hiring outlook: Some 15 percent of business executives said their companies are looking to hire immediately, a drop of three percentage points from last quarter. Overall, 53 percent of respondents said their companies had the right amount of staffing, the same as last quarter. Projected headcount expansion has fallen to 0.5 percent for the coming year, down from a post-recession high of 2.1 percent in the fourth quarter of 2014.
  • Survey takers have dimmer view of their own companies’ prospects: Optimism about business executives’ own organizations fell below 50 percent for first time since end of 2012. Some 44 percent now identify themselves as optimistic, down nine percentage points from a year ago.
  • Less robust expansion plans: Some 52 percent of business executives said they expected their companies to expand in the next 12 months, the lowest amount since the end of 2012. For the largest companies – those with more than $1 billion in annual revenue – expansion plans fell from 59 percent last quarter to 49 percent.
  • Different takes from different places: Business executives in the West are most optimistic (55 percent) about their region, while those from the South are least optimistic (38 percent).
  • Volatile industry outlooks: Construction is expected to have the brightest prospects in the coming year (with 59 percent of executives expressing optimism this quarter), followed by technology (53 percent) and real estate (52 percent). Optimism about finance and insurance continued its slide, however, and the category is now one of the lowest ranked sectors at 41 percent. The least optimistic sector, retail trade, saw a turnaround in the past quarter and now stands at 39 percent, up 11 percentage points from the end of 2015.
  • Deflation is a rising concern. Some 22 percent of executives listed it as a potential issue, double the amount from last quarter. Inflation concerns, meanwhile, fell nine percentage points to 14 percent, quarter over quarter.

The first quarter AICPA Economic Outlook Survey was conducted Feb. 9-24, 2016, and included 540 responses from CPAs who hold leadership positions. The overall margin of error is less than 3 percentage points.
For the full report, head to the AICPA's site here.