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Price pressures have been building as the global economic recovery has continued, and increased costs remain respondents' main concern this quarter. In terms of how businesses are responding to the changing economic environment, 40% say they are laying off staff, while 32% say they are considering scaling back investment in capital projects.

North America at the top

North America was once again the most confident region in the world in the second quarter. Confidence in the US was flat in the second quarter of the year, but it remains high by recent standards. This is reflected in the official data, which suggest that the massive tax cut at the start of the year is leading to higher consumption.

Africa follows closely

In Africa, economic confidence fell back in the second quarter of 2018 – but from a record high in Q1. Confidence, however, is still high by the standards of recent quarters, and Africa is the second most confident region after North America. The breakdown shows an improvement in the employment sub-component, but the fall in confidence suggests that all of Africa's key economies had a difficult start of the year.

Western Europe and UK plummet

Overall confidence in Western Europe fell sharply in the second quarter of the year, and it is now lower than its average since the GECS began. In the UK, economic confidence plummeted in the second quarter and is now well below the historical average. The fall is consistent with the latest GDP data and comes alongside the challenges in coming to an agreement on terms of UK's exit from the bloc.

China fears a trade war

Economic confidence in the Asia Pacific region dropped back slightly in Q2. However, confidence in Q2 was the second highest on record. China also had a drop in the second quarter with growing fears of a trade war with the US. In late June, the US administration threatened to impose another US$200bn of tariffs on Chinese goods. The move prompted a sharp fall in the stock market, which having fallen 20% from its recent high is now in bear-market territory.

About Narayanan Vaidyanathan, lead author, ACCA