Widespread Business Optimism Gives Global Economy a Temporary Boost

The first quarter of 2013 saw a marked improvement in global business confidence, according to the Global Economic Conditions Survey (GECS) of almost 2,000 senior finance professionals, according to a survey carried out by the Association of Chartered Certified Accountants in partnership with the US-based Institute of Management Accountants (IMA).

 

Almost a quarter (24 percent) of respondents reported increased business confidence, a rise of five percent from late 2012. Those reporting a loss of confidence fell to 37 percent, down from 43 percent in the previous quarter.

 

The increase in business confidence has been boosted by rising expectations of a global recovery with 43 percent of respondents believing that the economy was improving or is about to do so, an increase of 13 percentage points since the previous quarter.

 

At the global level, the Middle East reported the highest increases in both business confidence and levels of optimism regarding the global recovery.

 

Africa was the only region to report a fall in confidence in early 2013, due in part to a high number of struggling small and medium-sized enterprises and non-profit organisations who reported mounting pressures on cash-flow and new orders alongside dwindling business opportunities.

 

"At the global level, the confidence gains recorded in Q1 2013 are much larger than would be expected given improved economic fundamentals and are likely to dissipate," cautions Emmanouil Schizas, senior economic analyst at ACCA.  

 

Global business fundamentals showed genuine signs of improvement in early 2013, with respondents flagging reduced pressures on cash-flow, new orders and improved access to growth capital, which contributed to an overall improvement in business conditions.

 

"Although respondents report a steady improvement in term of opportunities for investment, there is no corresponding proliferation of genuine value-added business opportunities – suggesting that too much money may soon be chasing too few opportunities at the global level," continues Schizas.

 

Raef Lawson, Ph.D., CMA, CPA, IMA vice president of research notes that the global confidence gains recorded in Q1 2013 are much larger than what would be expected given the conditions on the ground.

 

"It seems that in many markets confidence is being fuelled by an expectation of economic improvement in the future, but it’s not clear, when looking at the fundamentals, where this is meant to come from. As a result, we believe this surge in confidence is likely to be short-lived," says Lawson.

 

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