Apr 2nd 2012
By AccountingWEB Staff
The world's CEOs, CFOs, and other senior management accountants have a cautious yet increasingly positive outlook for the global economy over the next 12 months, according to the first Chartered Global Management Accountant (CGMA) Global Economic Forecast released March 29, 2012, by the American Institute of CPAs (AICPA) and Chartered Institute of Management Accountants (CIMA).The quarterly forecast polled 600 management accountants from more than 60 countries on global and domestic economic conditions and the outlook for their organizations.
The CGMA Global Economic Forecast ‒ a comprehensive gauge of executive sentiment ‒ rose 7 points, to 65, from a baseline reading of 58 established during a fourth-quarter 2011 survey. The index is a composite of 10 equally weighted survey measures on a scale from 0 to 100, with 50 considered neutral and numbers above that signifying positive sentiment.
The 10 factors included in the CGMA Global Economic Index are:
- Global economy optimism ‒ optimism about the global economy.
- Domestic economy optimism ‒ optimism about respondents' own national economy.
- Organization optimism ‒ optimism about prospects for respondents' own organization.
- Expansion plans ‒ expectations of whether respondents' business will expand over the next 12 months.
- Revenue ‒ expectations for increases or decreases in revenue over the next 12 months.
- Profits ‒ expectations for increases or decreases in profits over the next 12 months.
- Employment ‒ expectations for increases or decreases in head count over the next 12 months.
- IT spending ‒ plans for IT spending over the next 12 months.
- Other capital spending ‒ plans for capital spending over the next 12 months.
- Training and development ‒ plans for spending on employee training and development over the next 12 months.
While all factors in the index rose, the global economic optimism component registered the most significant gain, rising 15 points from the fourth quarter. However, the current reading of 37 reflects continued concern about the global economy. Only 18 percent of respondents expressed optimism, ranging from 22 percent in the United States to just 12 percent in Asia. Still, that is up from last quarter, when 9 percent of all respondents said they were optimistic about the global economy.
"Management accountants are in a unique position to assess the future of the global economy, as they drive the strategic and financial decisions of their companies," said Arleen Thomas, AICPA senior vice president for management accounting. "In aggregate, the CGMA Global Economic Index rose 7 points from last quarter, indicating an important and positive economic trend. In the United States, the story is even stronger, with organizations feeling increasingly confident about the overall domestic economy as well as prospects for their own businesses."
In the United States, 44 percent of management accountants surveyed are optimistic about the domestic economy, compared to 23 percent in the prior quarter. Asked about their own organizations, 58 percent of US respondents are optimistic about prospects for their companies, an increase of 8 percentage points over last quarter.
Other key survey findings include:
Revenue and Profits: The global expected revenue increase for the coming 12 months is now 4.1 percent, up from 3.1 percent last quarter. In the United States, this number is 4.8 percent, up from 3.4 percent last quarter. The global expected increase in profits also improved, moving from 2.4 percent in the fourth quarter of 2011 to 3.5 percent this quarter. In the United States, this number is 3.8 percent, up from 3 percent last quarter.
Hiring: Globally, 42 percent of respondents said their organization plans to increase their number of employees in the coming year, an increase of 4 percentage points from last quarter.
- In the United States, 43 percent of respondents said their organization plans to increase their number of employees in the coming year. This compares to 45 percent last quarter.
- In Asia, 53 percent of respondents said their organization plans to increase their number of employees in the coming year. This compares to 49 percent last quarter.
- In the United Kingdom, 40 percent of respondents said their organization plans to increase their number of employees in the coming year. This compares to 33 percent last quarter.
- In Europe, 33 percent of respondents said their organizations plans to increase their number of employees in the coming year. This compares to 23 percent last quarter.
Expansion: Two-thirds (66 percent) of global respondents expect their business to expand at least somewhat in the coming 12 months. In the United States this number is 68 percent.
Top Challenges: Domestic economic conditions, global economic conditions, and domestic competition topped the list of challenges for respondents' organizations on an overall basis this quarter.
- In the United States, the top 3 challenges are domestic economic conditions, regulatory requirements/changes, and domestic political leadership.
- In the United Kingdom, the top 3 challenges are domestic economic conditions, global economic conditions, and domestic competition.
- In Europe, the top 3 challenges are global economic conditions, stagnant/declining markets, and developing new products/services/markets.
- In Asia, the top 2 challenges are global economic conditions and inflation. Employee/benefits costs and the availability of skilled personnel tied for third.
Industry Outlook: From an industry sector perspective, 63 percent of manufacturing respondents are now optimistic about their own companies, followed closely by those in finance and insurance (62 percent). Significantly, more than half of respondents in the retail and wholesale trade (59 percent) and technology sectors (55 percent) also are optimistic. Exactly half (50 percent) of respondents from banking, and slightly more than a third (37 percent) of construction industry respondents, are now expressing optimism.
The CGMA Global Economic Forecast quarterly survey was completed by CGMA panelists between February 22 and March 13, 2012. Panelists comprise CGMA management accounting professional decision makers (primarily CFOs, CEOs, and controllers) who work in business and industry. In total, the opinions of 618 CGMA management accounting professional decision makers from around the world were captured in first quarter 2012. Panelists were identified and initial data collected in a November 2011 survey. Those findings were intended to establish a baseline for the first quarter survey and were not released.
The AICPA and CIMA have formed a joint venture to establish the Chartered Global Management Accountant (CGMA) designation to elevate the profession of management accounting. The designation recognizes the most talented and committed management accountants with the discipline and skill to drive strong business performance.
AICPA Senior Vice President Arleen Thomas is available for interviews on the survey results and what they mean for global businesses in the coming months.