Confidence in the global economy recovered significantly in the early part of this year among accountants, regaining some of the optimism that had been lost last year, according to a new survey.
The survey, jointly conducted by the Association of Chartered Certified Accountants and the Institute of Management Accountants, polled 2,200 accountants around the world. The share of respondents who reported confidence gains nearly doubled, from 16 percent in late 2011 to 29 percent in the first quarter of 2012. While 54 percent of the accountants surveyed said they still believed the global economy was deteriorating or stagnating, that figure was down from 73 percent the previous quarter.
Business confidence in the U.S. in early 2012 increased roughly in line with the global average; 32 percent of respondents reported confidence gains, up from 18 percent in late 2011, while 49 percent believe the global economy is recovering or about to do so, up from 26 percent in the previous quarter. Survey respondents reported a significant recovery in new orders and business investment, and a particularly strong rise in employment, although substantial pressures remain.
All U.S. regions reported substantial, and statistically similar, confidence gains from a similarly low starting point. The exception was the Northeastern U.S., 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.”
Viewed globally, ACCA and IMA attribute much of the increase in global business confidence to objective improvements in the business environment, specifically new orders. However, the two organizations 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 sovereign 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.
The survey found increasing business dynamism, mostly in the Americas and Asia-Pacific, with businesses securing new orders where previously they would not have and in turn responding with increased investment and hiring.
ACCA and IMA said they welcome this development, noting that 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.
The professional bodies also acknowledged the contribution of governments in their major markets, many of which showed signs of loosening their fiscal policies to boost a flagging recovery. It is not clear how much longer they can afford to do so, as respondents generally continue to believe that many major economies, including both the U.S. 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 IMA vice president of research Raef A. Lawson, Ph.D., CMA, CPA. “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 noted that the global economy’s new-found dynamism has come at the expense of rising input prices. The report found 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.
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