Global Business Confidence Dropped in Fourth Quarter

According to the latest quarterly survey of domestic and international finance professionals, global business confidence dropped marginally in the fourth quarter of 2012, raising the spectre of more instability for 2013. These findings are detailed in the Q4 2012 Global Economic Conditions Survey conducted by ACCA (the Association of Chartered Certified Accountants) and IMA® (Institute of Management Accountants).

“There is no other major market in which respondents have such a negative view of fiscal policy, and are so concerned about the level of government spending, and there is no doubt this is weighing on both business confidence and optimism about the global recovery.”

Forty-three percent of respondents reported decreased levels of business confidence, up from 41 percent in Q3, while only 19 percent reported improved confidence levels. Meanwhile, 30 percent of respondents said the global economy was on course for recovery, up from 29 percent in Q3. Sixty-five percent believed it was stagnating or deteriorating, down from 67 percent.

The findings also reveal the mood of U.S. business across the regions remains gloomy, broadly in line with the global average. Forty-three percent of respondents reported loss of confidence in their businesses’ prospects over the past three months, versus 20 percent who reported confidence gains.

The South and Midwest states have lost the most confidence, and, in fact, have seen a negative trend for an entire year. The West and Northeast performed better in early 2012, but have since followed the rest of the U.S. into negative territory. Only the mid-Atlantic, where confidence was lowest to begin with, has seen more stability in the last three months.

Emmanouil Schizas, senior economic analyst at ACCA, said, “Global business confidence and perceptions of the global economy are tightly correlated and it’s unusual for these two indicators to move in opposite directions. The last time this happened was in early 2010, when the global recovery first started running out of steam.”

Raef Lawson, Ph.D., CMA, CPA, vice president of research at IMA, observed, “Perceptions of the U.S. economy in the last six months have been dominated by politics, notably the presidential election and the Fiscal Cliff. Responses to our survey clearly demonstrate the effects of this, with some respondents saying explicitly that they feel polarization and uncertainty are hurting the U.S. economy. This is evident in the behavior of businesses, with capital spending and job creation falling throughout the last six months and U.S. respondents reporting fewer opportunities for their organizations across the board.”

Mr. Schizas added, “There is no other major market in which respondents have such a negative view of fiscal policy, and are so concerned about the level of government spending, and there is no doubt this is weighing on both business confidence and optimism about the global recovery.”

Looking ahead Mr. Schizas concluded, “Going into 2013 there are reasons to be optimistic. Rising global employment levels, a potential end to the slowdown in China, lower volatility in Europe and a temporary resolution to the U.S. fiscal cliff crisis should all positively impact the global economy in the year ahead.”

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