Accountants feeling better about global economy in Q1
Global economic confidence rebounded in the first quarter of the year among accountants, especially in North America, according to a quarterly survey released Tuesday by the Association of Chartered Certified Accountants and the Institute of Management Accountants.
The latest Global Economic Conditions Survey from the ACCA and IMA indicated global economic confidence has reached its highest level in years, with strong growth since the start of 2017. Economic confidence is at its highest since the first GECS survey was issued assessing Q1 2009.
Confidence in North America rebounded significantly in the first quarter of the year, with 38 percent of the accountants polled feeling more confident about the future, compared with 26 percent who were feeling less confident. But while confidence improved in both the U.S. and Canada, the recovery in Canada was especially strong and has now reached a record level.
“The outlook for the global economy is as good as it has been for some time,” said Warner Johnston, head of ACCA USA, in a statement. “Recent tax cuts have provided a boost to confidence and will help to ensure that the economy grows by a decent 2.5-3 percent this year. With the economy doing well and the unemployment rate at a multi-year low, interest rates look set to rise. But with inflationary pressures relatively weak, rate increases are likely to be gradual.”
The boost in confidence in the U.S. is at its highest level since the first quarter of 2017, coming after the Tax Cuts and Jobs Act took effect last year. Confidence also is high by historical standards, with the proportion of respondents feeling more confident about the future being 10 percentage points more than those less confident.
The improvement fits with Gross Domestic Project data, with unemployment at multi-year lows and wages growing. The main risks for the economy are lingering uncertainty about interest rates and trade policy.
“Since the start of the year, policymaking in the U.S. has taken a more protectionist turn, causing concern about a possible trade war with China,” said IMA vice president of research and policy Raef Lawson in a statement. “It is even possible that this response by China could help de-escalate the crisis by making it clear to the U.S. that China will not stand idly by if it feels its export sector is put at risk. Indeed, the U.S. has announced a public consultation period to last until the end of May before it confirms whether the tariffs will go ahead.”
In contrast, accountants in the United Kingdom are concerned about the economy amid Brexit worries. The GECS poll of accountants in the U.K. found that 36 percent of respondents are considering scaling back investment in new capital projects, compared with just 16 percent who are looking to increase investment in new projects. Concerns have eased, though, about inflation with 48 percent of respondents expressing concern about rising costs, down from 52 percent in Q4 2018.
“The U.K. economy remains mired in Brexit uncertainty because the Article 50 deadline for leaving the EU has been extended beyond 29th March,” said Claire Bennison, head of ACCA U.K., in a statement. “Indeed the U.K. may now leave the EU only after an extended delay — or indeed not at all. This uncertainty is having a negative influence on business confidence. Along with other countries UK GECS confidence bounced in Q1, but it remains at a low level well below its long-run average. Similarly, the orders balance improved but remains consistent with moderate, below-trend GDP growth in coming quarters. ‘The GECS investment indicators are weak, reflecting the effect of uncertainty on long-term investment decisions.”
The global poll of 1,355 accountants indicated that all of the key regions reported a bounce in confidence, with the Asia Pacific region and the Middle East seeing the biggest gains. However, in all regions except the Middle East, confidence is lower than a year ago
The global survey also indicated easing concerns about inflation, with 48 percent of respondents expressing concern about rising costs, down from 52 percent in the fourth quarter of 2018. Only 22 percent of global respondents said they had problems accessing finance suggesting fairly easy financial conditions.
While 45 percent of respondents globally said they are considering laying off staff, 17 percent are considering taking on new workers. The global survey indicated 36 percent of respondents are considering scaling back investment in new capital projects, compared with just 16 percent who are planning to increase investment in new projects. The possibility of suppliers going out of business was a concern for only 12 percent of respondents, unchanged from the fourth quarter of 2018.