As Economic Outlook Improves, Here’s How You Can Prepare
For the first time since about 12 months ago, CPA decision-makers, including CEOs, chief financial officers and controllers, are optimistic about revenue and profit for the coming year, the Journal of Accountancy reports.
See: Treasury Secretary Yellen Confident $1.9 Trillion Bill Will Help Bring Country ‘Back to Full Employment’ Next Year
Find: Economy, Labor Market to Improve ‘Rapidly’ in 2021, According to Congressional Budget Office
Based on the American Institute of Certified Public Accountants’ first-quarter AICPA Business & Industry Economic Outlook Survey, economic sentiment stands at 68 out of 100, the journal reports. Any number over 50 indicates positive sentiment. When pandemic lockdown measures began in March 2020, sentiment dropped from 76 in the first quarter of 2020 into the upper 30s.
Approximately 47% of survey participants said they are optimistic about the U.S. economy in 2021, while 27% voiced neutral sentiments about economic growth. In addition to local outlooks for their businesses improving, the survey discovered that optimism for the global economy has also risen, up to 36.5% from 26.9% last quarter.
“I think overall [there’s] a pretty guarded yet optimistic outlook going forward,” said Ken Witt, CPA, CGMA, senior manager for management accounting and member engagement at the AICPA, on a podcast hosted by Neil Amato. He noted that the change in administration and the roll out of COVID-19 vaccinations both played a role in the increased optimism.
Inflation and Recruiting Concerns
One concern c-level finance executives have in 2021: Inflation. A minimum wage hike could compound the issues faced by business owners in service industries, in particular. The Journal of Accountancy reported that labor markets have been tight, especially for lower-wage, in-person hourly positions.
Witt said in the podcast that the availability of skilled personnel has become the second biggest challenge for c-level executives, based on the survey. “Employee and benefit costs moved up four slots to No. 5, and staff turnover found its way back into the top 10 at No. 9. So, when we have those employment-related challenges showing up on our top challenges for business, I think that there’s some good news in the bad news.”
How to Prepare for Economic Rebound
Just as business owners face specific challenges as they poise for economic recovery, hourly wage workers and other Americans who need to keep close tabs on their finances can also take steps to prepare, hedging against inflation and even making plans to come out of the pandemic in a better situation than they went in.
“The past year has been a time of decreased spending on things like travel, entertainment, dining and other miscellaneous things that a lot of people may have realized they don’t necessarily need. As things open up a little more, this is a great opportunity to keep those positive habits,” says Tony Molina, CPA and senior product specialist at Wealthfront, an automated investment service firm.
Additionally, with interest rates still close to zero, it’s a good time to pay off or transfer high-interest credit card debt, Molina advised. “If you’ve been thinking about refinancing your mortgage, or if you think you’ll need a loan to get you through the next few months, now is the time to start looking at those options and locking in these lower rates,” he said in an email interview.
But don’t take the extra cash you’ve freed up and start spending beyond your means, he warned. “For things you might start to feel comfortable spending on in the near future, like a vacation, it’s important to plan it out and make sure it fits into your budget,” he said.
More from GOBankingRates