CGMA Global Economic Forecast Results Are In

Posted by Terri Eyden on Jul 11 2012 2470 printer friendly

The world's CEOs, CFOs, and senior management accountants have an increasingly negative outlook for the global economy over the next 12 months, according to the CGMA Global Economic Forecast released July 10 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.

Talking Points

"Although the CGMA Global Economic Index is still slightly above neutral, the pullback in optimism points to an unclear future in which companies must be prepared to address a variety of economic scenarios. Businesses continue to show a need for the strategic perspectives of management accountants who can navigate the uncertain elements of our global economy."

‒ Arleen Thomas, CPA, CGMA, and AICPA senior vice president for management accounting

"[Organizations] should turn to the management accountants in their business, who, like financial athletes, can help boards better understand what needs to be done to win in today's competitive market."

‒ David Rowsby, regional director-Europe, CIMA

The 10 factors included in the CGMA Global Economic Index are:

Global economy optimism
Domestic economy optimism
Organization optimism
Expansion plans
Revenue
Profits
Employment
IT spending
Other capital spending
Training and development

The CGMA Global Economic Index - a comprehensive gauge of executive sentiment within the forecast - dropped 7 points to 58 from the first quarter 2012 reading of 65. While all factors in the Index weakened, the global economic optimism component registered the most significant decline. Only 11 percent of respondents expressed optimism. The decline appears to reflect the worsening of the sovereign and financial crisis in Europe and its effects on other regions, slower economic growth in China, and U.S. political and fiscal uncertainty.

Overall, in the United States:

36 percent of management accountants surveyed are optimistic about the domestic economy, down from 44 percent in the prior quarter
51 percent of respondents are optimistic about prospects for their companies, a decrease of 7 percentage points over last quarter.

"Our survey shows there is still a risk of a knee-jerk reaction by organizations, with economic pessimism leading to an investment freeze on areas that are the bedrocks of future success, such as training, recruitment, R&D, and capital investment," said David Rowsby, regional director-Europe, CIMA.

Other key survey findings include:

Globally, companies expect to increase headcount by only .6 percent, weaker growth than the 1.6 percent increase predicted just three months ago. With the exception of the retail and wholesale trade, the reduced projections for headcount growth were spread across all industry sectors.
In the United States, hiring projections declined from 2.4 percent to 1.3 percent. While hiring growth remains weak, 34 percent of management accountants said their businesses are operating with too few employees.
In the United States, fear of inflation dropped from 49 percent to 33 percent.
Concerns about deflation continue to be low in the United States, but the number of European companies concerned about deflation increased to 15 percent from 11 percent first quarter.
Only 9 percent of U.S. companies expect it will become more difficult to obtain financing, compared to 37 percent in Asia, 28 percent in emerging economies, and 28 percent in Europe.

From an industry sector perspective:

53 percent of finance and insurance respondents are now optimistic about their own companies, followed closely by those in retail and wholesale trade at 50 percent.
All other sectors reported less than 50 percent optimism, including banking (48 percent), manufacturing (45 percent), and technology (41 percent).

To learn more, you can access the entire CGMA Global Economic Forecast.

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