Although it remains high by recent standards, the slight fall in confidence reflects increasing fears of a trade war between the US and China. This continues to effect global outlook, with China’s economic sentiment falling sharply.
Despite this, North America remained the most confident region in the world in the second quarter, with official data showing that the massive tax cut at the start of the year is leading to higher consumption in the US; Africa was the second most confident region, sharing an optimistic outlook with North America. Both regions are where the number of people expecting conditions to improve exceeded those who expected conditions to worsen. Central & South America was the least confident region.
The picture for the UK is in sharp contrast, where economic confidence plummeted in Q2, with figures being well below the historical average. This finding aligns with the latest GDP data, which shows that the economy grew by just 0.2% in the first quarter of 2018. It also comes alongside worrying signs that the UK is struggling to come to an agreement with the rest of the European Union on the terms of its exit.
Narayanan Vaidyanathan, Head of Business Insights at ACCA says: ‘The net dip in global confidence levels reflects factors such as fears of US-China trade wars more than compensating for other factors such as low employment and tax cuts in the US. The dip was seen both in OECD and non-OECD countries, though confidence in both groups remains relatively high by historical standards.’
Raef Lawson, IMA vice president of Research and Policy and Professor-In-Residence adds: ‘Our Q2 analysis mirrors other data that the global economic recovery has slowed since the start of the year. However, confidence is still high by past standards, and a sharp slowdown in economic growth is unlikely in the months ahead. The differences between regions and countries shows marked differences, with concerns about the China-US trade war intensifying - these are uncertain times, and Q3’s results will be heavily impacted by the decisions made in the Whitehouse about tariffs.’
GECS also shows how businesses on the global stage are responding to the changing economic environment:
- 40% say they are laying off staff, which is unchanged from last quarter
- 32% say they are considering scaling back investment in capital projects
- just over a quarter (27%) of respondents are considering hiring more staff
- 23% are looking to expand investment in capital projects.
Looking ahead, ACCA and IMA’s research shows that the outlook for the global economy remains positive – despite signs that economic growth in some key parts of the world’s economy have slowed since growth reached a peak in the second half of 2017. The report concludes that while the global economy is likely to remain pretty strong over the next year, a modest slowdown looks likely.
The GECS report can be found here.
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