U.S. business executives are continuing to become more optimistic about the economy amid government stimulus spending and an improved COVID-19 vaccine rollout though inflation concerns are growing.

In its Economic Outlook Survey for the first quarter, the Association of International Certified Professional Accountants said 47% of respondents expressed optimism about economic prospects over the next 12 months, up 10 points from the previous quarter.

Overall, the CPA Outlook Index rose from 62 to 68, with all major index components improving. Three-quarters of respondents cited progress in controlling the COVID-19 pandemic as the most helpful governmental step for business in the coming year.

“We definitely see a resurgent sense of optimism about the economy overall, despite the deep pain that remains in key sectors and industries,” Ash Noah, a spokesman for AICPA, said in a news release.

He noted, however, that majority of business executives are still pessimistic or neutral about the economy and 76% say the pandemic has had a negative impact on their organization, with one in five describing that impact as significant.

“Business executives are communicating that economic recoveries are not like flipping a switch,” Noah said. “The pandemic has caused significant dislocations and uncertainties with customer demand, supply chain, and production cycles.”

The number of executives concerned about inflation, though, grew from 24% to 44%, the highest level since the end of 2018. Labor costs were cited as the primary risk factor for inflation as concerns about raw materials costs eased.

According to AICPA, executives’ view of their own companies’ prospects over the next 12 months flipped into positive territory, with 58% expressing optimism compared with 49% percent last quarter. The hiring outlook is also improving, with even sectors hardest-hit by the pandemic such as retail and hospitality now projecting increases in headcount.

The number of executives concerned about inflation, though, grew from 24% to 44%, the highest level since the end of 2018. Labor costs were cited as the primary risk factor for inflation as concerns about raw materials costs eased.

Many economists predict inflation will surpass 2% once the pandemic eases but Federal Reserve officials believe any increase will be mild and temporary.

“Domestic economic conditions” was the number one issue impacting business for the fourth quarter in a row, AICPA said, while “availability of skilled personnel” moved up a slot to number two and “domestic political leadership” fell from number two to number four.

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