A survey of certified public accountants registered its highest level of optimism about the economy since 2007. Employers also said they planned to increase hiring slightly and are concerned about inflation.

The latest AICPA/UNC Quarterly Economic Outlook survey measured economic optimism at 0.69, up 0.07 points. A reading above 0.5 indicates a generally positive outlook and increasing economic activity.

“We see a substantial bounce in optimism about the economy for the first time in nearly three years,” said AICPA Vice President Carol Scott said in a statement Thursday. “The new composite index shows positive movements across the board. However, this seems to be tempered by concerns about inflation.”

Forty-eight percent of CPAs in executive positions expressed optimism about the U.S. economy in the first quarter of this year, up 20 points from the fourth quarter of 2010.

Companies with hiring plans rose by 3 points to 13 percent. All industries expect to increase hiring in 2011, with the average expected increase in number of employees rising to 1.5 percent, compared to .6 percent in fourth quarter of last year.

Fifty-seven percent of survey respondents said they are optimistic or very optimistic about the prospects for their own companies. Sixty-six percent expect to expand their businesses in the next 12 months. The technology sector is leading the way, with an expected headcount increase of 4.4 percent in 2011.

“The most striking feature is the consistency of optimism,” University of North Carolina at Chapel Hill accounting professor Mark Lang said in a statement. “Respondents are optimistic about their own organizations, as well as the economy as a whole, and,most importantly, their optimism is translating into planned spending and employment increases. It appears that the recovery continues to accelerate.”

Up 21 percentage points since from the last quarter, 55 percent of respondents expressed concern about inflation. Thirty-six percent indicated concern about rising material costs, while 18 percent are concerned with an increase to energy prices.

However, 47 percent do not expect to pass increased costs onto customers during the next quarter.

Other key findings of the survey include: 

  • There has been a very slight change in reported hiring plans. Thirteen percent of respondents, up from 10 percent last quarter and 8 percent a year ago, say they don’t have enough employees and plan to hire. The number that don’t have enough and are reluctant to hire dropped 3 percent, from 22 percent in last quarter of 2010 to 19 percent this quarter
  • Hiring plans are improving slightly, but many don’t expect employment to return to pre-recession levels until 2012. Only 7 percent expect to return to pre-recession levels in the next 12 months, while 23 percent expect that to happen within two years. Twenty-eight percent do not expect to return to pre-recession levels in the foreseeable future. Seven percent have already returned to pre-recession levels, and 31 percent indicate that they did not decline during the recession.
  • Cash and liquidity positions have changed very little. Almost half (46 percent) of respondents are where they want to be, while 30 percent say they have too much and 24 percent too little. Only 11 percent have plans to deploy.
  • Customer demand, employee healthcare costs and regulatory requirements remain the top challenges. Economic and political instability debuted at no. 4.
  • The number of companies planning increased IT spending rose from 47 percent to 52 percent, and the number planning increases in other capital spending rose from 42 percent to 48 percent. The average expected increase in IT and other capital spending rose to 2.3 percent and 2.1 percent, respectively.
  • Forty-five percent of respondents plan to take some advantage of the first-year tax deduction for eligible equipment in 2011, but only 12 percent expect to be able to take advantage of the full deduction. Most respondents (60 percent) believe that reducing the regulatory burden would have the most impact on job creation.

The first quarter AICPA/UNC Quarterly Economic Outlook survey was conducted via an online questionnaire Feb. 9-24 and included 1,168 qualified responses from CPAs who hold leadership positions, such as chief financial officers or controllers in their companies. The overall margin of error was less than plus or minus 3 percentage points.

 Read more about the survey here.

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