Accountant confidence in economic recovery lost momentum in Q3

Global confidence among accountants in the economic recovery from the COVID-19 pandemic declined in the third quarter of the year, especially in North America.

A new survey released Tuesday by the Association of Chartered Certified Accountants and the Institute of Management Accountants found that global confidence fell by nine points in Q3, with the biggest drop occurring in North America, which plummeted 41 points, followed by Western Europe, falling 24 points. However, both parts of the world remain at relatively high levels of confidence, and the same is true globally. Confidence actually increased in Asia Pacific by 11 points and South Asia by 20 points, after falls in the previous survey. The Middle East was the only region to show improved confidence in Q2 and Q3.

In terms of order volume as a measure of economic activity, the survey pointed to a split between developed regions and emerging markets. Declines in orders affected North America and Western Europe, in contrast to modest improvements in emerging markets. However, the broader economic prospects in developed economies remain brighter than in emerging markets, where low vaccination rates continue to drag on economic recovery. Aside from Africa, all major regions are now reporting order levels above their pre-pandemic level, indicating a continued global recovery.

“Although economic growth has slowed in many regions and the prevalence of the Delta variant of COVID-19 particularly in developed countries expectedly drove down global confidence, underlying demand remains strong,” said Loreal Jiles, vice president of research and thought leadership at the Institute of Management Accountants. “As COVID-19 vaccinations continue to increase and we remedy supply shortages and increased prices in advanced economies, there is an opportunity for overall confidence to increase significantly.”

Another positive indication from the survey are the two “fear indices,” which measure concern that customers and suppliers may go out of business. Both indices fell again in Q3 and are now back in line with their long-run average levels after spiking around the second quarter of 2020.

However, worries about operating costs are now at their highest level since the beginning of 2019 and increased five points globally in Q3. This is driven by higher transport and commodities costs, leading to higher inflation and weaker growth now.

“A moderation in growth was to be expected, as the pace set earlier this year could not be maintained indefinitely,” said Michael Taylor, chief economist at ACCA, in a statement. “Although confidence and orders have lost momentum in regions including North America and Western Europe, we are still seeing an encouraging picture of global economic recovery overall. Concerns about extra operating costs for businesses should prove temporary as the price mechanism operates to encourage increased supply and reduced demand. But for now, the effects are to moderate global growth from a rapid to a steady pace. Nevertheless, growth should be sufficient for more economies to regain their pre-pandemic level of activity by the end of the year.”