Trade Conflicts, Rising Interest Rates Weigh Down View of U.S. Economy

Arleen R. Thomas

For the second quarter in a row, business executives are reining in their optimism about the U.S. economy, in part because of the potential impact of trade and tariff policies and rising interest rates, according to the third-quarter AICPA Economic Outlook Survey.

The survey polls CEOs, CFOs, controllers and other CPAs in U.S. companies who hold executive and senior management accounting roles.

Sixty-nine percent of business executives said they were optimistic about the economy over the next 12 months, a drop of five percentage points from last quarter and 10 percentage points from the start of the year. Optimism about their own company’s outlook slipped a percentage point to 69%. Both rates remain strong, however, from a historical perspective.

“It’s unusual to see a decrease in U.S. economic optimism when key performance indicators such as profit and revenue are perceived to be on the rise,” says the AICPA’s Arleen R. Thomas. “On the one hand, business executives are encouraged by the impact of federal tax reform and reduced regulation at home, but there is some concern about trade wars, interest rate hikes and other factors that could contribute to a global economic slowdown.”

“Availability of skilled personnel” remains the No. 1 challenge for businesses for the fifth quarter in a row, the survey found.

Other key findings:

  • Forty-nine percent of business executives said the likely impact of increased tariffs and tougher trade policies by the United States would be unfavorable for their business, while 4% said it would be favorable.
  • Sixty-eight percent of respondents said they viewed the predicted impact of the Tax Cuts and Jobs Act on their business for the upcoming 12 months as favorable, with 23% saying their outlook had become more favorable since the start of the year.
  • After availability of skilled personnel, the No. 2 and No. 3 challenges for businesses were “regulatory requirements and changes” and “domestic competition,” respectively.