Apr 24th 2012
Confidence in the global economy recovered substantially in early 2012, regaining some of the optimism lost over the last year, according to the Q1 2012 Association of Chartered Certified Accountants (ACCA)/Institute of Management Accountants (IMA) Global Economic Conditions Survey, the largest global study of professional accountants.
The quarterly survey, conducted by the ACCA and IMA represents the views of 2,200 professional accountants around the world. Regarding their overall confidence in the global economy:
- 29 percent reported they have more confidence in the global economy, up from 16 percent in late 2011.
- 54 percent still believed the global economy was deteriorating or stagnating, down from 73 percent the previous quarter.
Economic Conditions in the United States
Business confidence in the United States in early 2012 rose roughly in line with the global average:
- 32 percent of respondents reported confidence gains, up from 18 percent in late 2011
- 49 percent believe the global economy is recovering or about to do so, up from 26 percent in the previous quarter.
- Respondents reported a significant recovery in new orders and business investment, and a particularly strong rise in employment, although substantial pressures remain.
- All US regions reported substantial, and statistically similar, confidence gains from a similarly low starting point, with the exception of the Northeast where confidence grew the least during early 2012.
"When the results came in, we were a little skeptical and had to consider all of the likely objections first," said Emmanouil Schizas, editor of the ACCA/IMA Global Economic Conditions Survey. "Much of the rise in confidence is being reversed as we speak, as the relief factor subsides, but a lot of it is here to stay."
Economic Conditions Globally
- Much of the rise in global business confidence to objective improvements in the business environment, specifically new orders, but ACCA/IMA also warn that relief is an important driver in the short term ‒ especially given the decreasing chances for nightmare scenarios anticipated in late 2011, such as an escalation of the European debt crisis or a hard landing for the Chinese economy.
- Confidence gains were fairly consistent across global regions and industries, although the Americas and Western Europe seemed to benefit the most in early 2012, as did manufacturers and distributors, particularly in the high-tech sectors.
- There is increasing business dynamism, mostly in the Americas and Asia-Pacific, with businesses (1) securing new orders where previously they would not have, and (2) responding with increased investment and hiring.
- Investment has been subdued at the global level since the end of the "green shoots" stage of the global recovery, which lasted from mid-2009 to mid-2010. Africa is still the most confident of the seven major regions covered by the survey, but it is clearly losing ground.
- Respondents generally continue to believe that many major economies, including both the United States and China, are likely to spend unsustainably in the medium term. On the other hand, finance professionals in Western Europe and other countries experiencing austerity also doubted the sustainability of their own governments' fiscal policies.
"It's too early to say whether the pattern of the modest recovery in 2012 is sustainable," noted Raef A. Lawson, PhD, CMA, CPA, IMA vice president of research. "It seems to rely on a sustained recovery of demand in the West, supply in the East, and confidence in sovereigns. It's a precarious balance."
Finally, ACCA and IMA note that the global economy's new-found dynamism has come at the price of rising input prices, and they note that if even a timid recovery is accompanied by rising inflation, then a full-blown recovery, if and when it occurs, is likely to provide a challenge for central banks and other policymakers.
- CGMA Global Economic Forecast Shows Cautious Optimism for Year Ahead
- Global Trade Drying Up, Says Economic Survey of Finance Professionals
Source: Institute of Management Accountants