Business Optimism Remains Static But Strong

The latest Global Business Outlook survey from KPMG International suggests that businesses are ready to begin investing again as the healthy optimism recorded earlier in the year holds firm.


Optimism around employment, capital expenditure and R&D expenditure is slowly increasing, raising hopes for a sustainable recovery across many key markets.


The survey, compiled by research firm Markit on behalf of KPMG International, works on a net balance basis, with the percentage of respondents feeling more pessimistic about their company’s outlook in 12 months’ time deducted from the percentage feeling more optimistic about the future.


Across most of the key indicators such as business activity, revenues, new orders and profits, there was negligible difference from the previous survey in March. Business activity optimism was static at +49.9 for the manufacturing sector and +43.9 for the service sector. Optimism around revenues saw a small increase of two or three points at +45 and +40.7 for manufacturing and services respectively.


Against this predominantly static background, the real interest comes on the investment front. Indicators in this area had typically lagged the others by 30 points or more but are now closing the gap. Optimism around increased employment in manufacturing rose six points to +20.9, with the service sector also up two points to +19.3. Manufacturers also felt more confident about increasing capital expenditure (up six points to +21.7) and R&D expenditure (up two to +20.8); all of which points to more businesses believing the recovery to be sustainable and feeling more secure in making investment decisions.


On a country level, the latest survey reveals a number of different stories to be told. In the US, confidence remains resolutely strong with optimism around manufacturing employment now up to +40. In India, there have been 15 to 20 point gains on some indicators as it closes the gap on the super-confident Brazilian and Russians. In Europe, it has been the turn of the UK and Spain to suffer as their service-led economies evidently struggle to come to terms with the impact of government austerity measures and sovereign debt issues respectively. In fact, across the board, responses from the service sector are somewhat more muted compared to manufacturing as concerns around government spending and consumer confidence continue to bite.


Sadly – but unsurprisingly – the biggest loss in business confidence has been registered in Greece with figures as low as -40 or -50 now recorded against key manufacturing indicators.


China also recorded lower optimism figures, albeit from a much high starting point. Falls of as much as 20 points do not tell the whole story here though as this can be directly attributed to firm government action to rein in its own booming economy and head off fears around inflation. Chinese businesses would simply appear to be reacting accordingly.



Suggested Articles

Some of you might have already been aware of the news that Questex—with the aim to focus on event business—will shut down permanently all media brands in Asia…

Some advice for transitioning into an advisory role

Global risks are intensifying but the collective will to tackle them appears to be lacking. Check out this report for areas of concern