The latest edition of the Global Economic Conditions Survey, conducted by ACCA (the Association of Chartered Certified Accountants) and the Institute of Management Accountants (IMA) suggests that the global economy recovered substantially in early 2012 and regained some of the dynamism it had lost over the last year.
The survey findings, representing the views of about 2,200 professional accountants around the world, were welcomed by the two professional bodies: the share of respondents reporting confidence gains in their own organisations had nearly doubled from 16% in late 2011 to 29%, and while the majority (54%) still believed the global economy was deteriorating or stagnating, that figure was down from 73% in the previous quarter.
Emmanouil Schizas, editor of the ACCA/IMA Global Economic Conditions Survey, said of the global findings: 'When all the results came in, we were a little sceptical and had to consider all of the likely objections first. 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.'
ACCA and IMA attribute much of the rise in global business confidence to objective improvements to the business environment, especially new orders, but also warn that relief is an important driver in the short term - especially due to the fact that a number of nightmare scenarios that had seemed likely in late 2011, such as an escalation of the European sovereign debt crisis or a hard landing in China, appeared more remote in the last quarter. There also appears to be a renewed faith in the prospects of the global economy and the strength of the recovery. These developments were also reflected in rising business investment and employment.
Confidence gains were fairly consistent across 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 reports increasing business dynamism, mostly in the Americas and Asia-Pacific, with businesses securing new orders where previously they would not have and responding with increased investment and hiring.
ACCA and IMA 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.
ACCA and IMA believe that the bounce in investment is focusing on two kinds of opportunities in particular. Customer insights, namely the need to understand and benefit from spending decisions under new constraints, is one; the other is supply chain optimisation through deepening relationships and a stronger focus on quality.
The professional bodies also acknowledge 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 US 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.
Emmanouil Schizas said: 'It’s too early to say whether the pattern of the modest recovery in 2012 is sustainable, but 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 note that the global economy’s new-found dynamism has come at the price of rising input prices, and note 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.