Global Business Confidence at 12-Month High

Global business confidence is at its highest in 12 months, with the U.S. continuing a stable recovery, according to the latest Global Economic Conditions Survey (GECS) from ACCA (the Association of Chartered Certified Accountants) and IMA (Institute of Management Accountants).

The report - the largest regular economic survey of accountants around the world  found that confidence in North America improved during Q3, with only 32% of firms reporting they were less confident – down from 36% in the Q2.

Business confidence in the U.S. improved for the third quarter in a row and is now at its highest level since Q2 of last year. The recent improvement in confidence coupled with strong employment growth and high core price pressures are all reasons to think that the Fed will resume its tightening cycle sooner rather than later.

The report notes that the investment opportunities index fell to its lowest level since the final quarter of 2012, possibly indicating that uncertainty over the outcome of November’s presidential election is causing companies to put big plans on hold.

Meanwhile, fears that headwinds from the U.K. vote to leave the E.U. in June could spread to the global economy have not been realized, with confidence among U.K. businesses holding up relative to the previous quarter – although it is still low, with respondents reporting a decrease in confidence outnumbering those reporting an increase.

Protectionist sentiments

With protectionist sentiments on the rise across many nations, the November presidential election could have a significant impact on whether this improving confidence translates into genuine increases in employment and investment.

Faye Chua, head of business insights at ACCA, says the survey highlights the importance of governments supporting growth and their increasing realization of the limits of monetary policy.

“Over 51% of respondents expected government spending to rise, which has driven global business confidence to the highest point in over a year,” Chua said. “After years of reduced investments in most Western economies, a combination of falling budget deficits and bond yields is encouraging governments to reach for their wallets. This is good news for business in a continued depressed climate for investment and hiring.”

Raef Lawson, Ph.D., CMA, CFA, CPA, IMA vice president of research and policy, notes that there are signs of improvement not just in the U.S., but in significant economies, including Brazil and Russia.

“North America is performing strongly in contrast to most other regions, helped by strong employment growth in the U.S. and recovering oil prices fueling a buoyant mood in Canada with respect to construction and investment,” Lawson said.

“Meanwhile, confidence in China is at its highest level since 2012, which has had an uplifting effect on many emerging markets. Even Brazil, which has been in deep recession for several years, and Russia are showing tentative signs of improvement.”

Despite improvements in confidence, the world is yet to see it translate into a meaningful boost to hiring and investment. Chua noted that only 19% of firms said they are considering hiring new staff, and only 14% were looking at opportunities to invest in new technology. In every region, there were more businesses planning to cut staff than those planning to hire more.

 

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