ACCA and IMA find global confidence at all-time low among accountants

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Economic confidence around the world has plunged to a new low point, according to a new survey of accountants by the Association of Chartered Certified Accountants and the Institute of Management Accountants.

The quarterly Global Economic Conditions Survey, released Thursday, found that confidence among ACCA and IMA members fell to an all-time low in the fourth quarter of 2018, the third consecutive quarter it declined. Among the factors cited were signs of weakening economic growth in the U.S., China, and Europe. In the U.S., the decline in confidence, which has mirrored volatility in the U.S. stock market, reflects factors such as less supportive monetary and fiscal policy.

“Confidence in the U.S. fell back again in the final quarter of the year and is now at an all-time low,” said ACCA USA head Warner Johnston in a statement. “There are signs that domestic demand is starting to slow, owing to a combination of higher interest rates and the waning impact of the recent fiscal stimulus.”

But the report indicated that growth still has momentum. Despite falling last month the GECS orders balance for the U.S. remains consistent with annual gross domestic product growth of 2 to 2.5 percent in the first half of 2019. Recession this year is considered to be extremely unlikely, although the continuing government shutdown is having an increasingly negative impact on the economy.

Higher mortgage interest rates are cooling home-building activity in the U.S., but the U.S. job market remains buoyant, which should help lift consumer spending in the months ahead.

“The waning impact of last year’s fiscal stimulus in the U.S., combined with higher interest rates, will moderate growth this year – after near 3 percent expansion in 2018,” said IMA vice president of research and policy Raef Lawson in a statement. “The slowdown should be relatively gradual, however, with GDP growth in the region of 2.5 percent this year. There is no sign yet of a softening in the extremely buoyant labor market. So while the Federal Reserve may limit further interest rate increases this year, an easing of monetary policy is highly unlikely. But there are concerns further out with a risk of below-trend growth in 2020 that would trigger easier monetary policy. “

Trade tensions are still a risk for the economy, despite continuing negotiations between the U.S. and China. Even at a maximum level, the report predicts that U.S. tariffs on Chinese imports will have a modest direct effect on the U.S. economy. But there is still an indirect effect from the uncertainty caused by the trade tensions and that too has been one factor behind the recent stock market volatility.

Except for government spending, all the major subcomponents of the GECS survey fell, including a sharp plunge in capital expenditure and a slight decline in employment, reflecting the health of the country’s jobs market.

Beyond the U.S., all of the key regions around the world indicated negative confidence—with more people pessimistic about the outlook than—the lowest scores being in Western Europe and the Caribbean. The most confident—or least pessimistic—part of the global economy was again South Asia, followed by Africa and North America.

In a sign of the less upbeat outlook, 47 percent of survey respondents globally said they are considering laying off staff, with just 18 percent considering hiring new employees. In addition, 39 percent of the respondents said they are considering scaling back investment in new capital projects, compared with 16 percent who plan to increase investment in new projects.

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Economic indicators International accounting Certified Management Accountants ACCA IMA