Business Confidence in Asia Edges up as Global Outlook Holds Steady

Confidence among business leaders in Asia rose in the first quarter of 2017, reaching a two-year high, according to YPO. The YPO Global Pulse Confidence Index for Asia increased for the second consecutive quarter, gaining 2.1 points to 63.3.

Business leaders in Asia reported a more cautious outlook than their counterparts in the United States but were more optimistic than chief executives in the European Union (EU). Having fallen behind in the fourth quarter of 2016 (4Q 2016), Asia once again came in ahead of the Index's global composite score of 62.5.

Whilst the overall regional picture was significantly improved, there were marked differences in sentiment across the major economies in the region. India reported a more positive outlook, gaining 3.2 points to 66.0, reversing the dip it experienced in Q4 2016.

India remains the most confident of any of the world's top ten economies. Sentiment amongst business leaders in China remained relatively flat, edging up 0.3 point to 61.6. However, Japan reported a more subdued outlook, slipping 2.6 points to 55.7, following a decrease in consumer spending in the first three months of the year.

For the second consecutive quarter, economic sentiment amongst the emerging economies in Asia saw a healthy improvement, as global commodity prices continued to rebound.

On the back of a 9.0-point surge in the final quarter of last year, the YPO Global Pulse Index for Association of Southeast Asian Nations (ASEAN) countries rose 4.0 points to land at 66.0, its highest level since July 2014. Most notably, Malaysia and Singapore reported significantly more positive outlooks.

"It's positive to see that business leaders in Asia remain optimistic about the economic climate and the potential for growth, despite uncertainty surrounding the stability of the global economy, and the potential impact of more protectionist U.S. economic policies," said YPO member Wei Chen, Founder and Chairman of Sun Capital.

"Of course, chief executives will continue to monitor economic indicators and the socio-political events unfolding within the region and beyond, but they will definitely believe that they can take advantage of these current economic conditions."

Globally, the YPO Global Pulse Index edged up 0.3 point to 62.5 during the quarter, its highest level since January 2015.

For the second consecutive quarter, the United States reported the highest level of confidence in the world, inching up 0.3 point to 64.9. Confidence in the European Union (EU) remained flat at 60.9, while Africa is the second-least confident region globally, edging down 0.3 point to 54.4.

Elsewhere, confidence in Latin America dropped by 1.2 points to 57.1, while confidence in the Middle East and North Africa (MENA) region showed the biggest decline, sliding 4.3 points to 55.2. Non-EU Europe reported the lowest level of confidence in the world, falling 2.5 points to 51.8.

Economic climate set to get better

Business leaders in Asia were optimistic about short-term economic conditions. The majority (55%) predicted that the economic landscape would improve over the next six months, while only 12% felt that the climate for business would deteriorate.

Chief executives confident about revenue and employment growth

The YPO Sales Confidence Index for Asia climbed 3.4 points to 70.3 in 1Q 2017. Almost three-quarters (70%) of chief executives expected to increase turnover in the next 12 months, while only 7% predicted a decline in revenue.

When it came to hiring, the YPO Employment Confidence Index edged up 1.5 points to 58.3, its highest level since July 2015. A significant 40% of business leaders expected to increase headcount over the next year, whilst only 8% predicted a decline in staff numbers. The majority (52%) reported that the size of their workforce would remain flat.

Finally, the YPO Fixed Investment Confidence Index slipped 1.0 point to 63.2.

Despite the marginal drop, this was the highest confidence level of any region in the world. More than half (51%) of respondents expected to increase levels of fixed investment in the next 12 months, compared with only 4% who predicted reduced investment.

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