The CGMA global economic forecast is a leading indicator of global economic growth and contraction that is based on global financial executives’ evaluation of corporate prospects, tangible performance data, and first-hand knowledge of company staffing, spending and financing plans. The survey is conducted quarterly, polling AICPA and CIMA members holding executive positions in both public and privately-owned organizations of all sizes, and across a broad spectrum of industries.
CGMA global optimism improves Q1 2012, Europe and UK less optimistic
Global executives have become more confident about current economic conditions over the latest quarter, both in terms of the outlook for the global and national economies and the prospects for their own company. The increase in confidence reflects the improvement in market conditions between the final quarter of 2011, which was dominated by the eurozone debt crisis, and the first quarter of 2012 that has seen an easing of concern over the euro and more positive economic data from the United States. However these measures of optimism are still below the levels that would be consistent with a broad-based economic recovery. Other significant findings include:
1. Optimism about the global economic outlook has improved but is still at low levels.
2. Executives’ confidence in their domestic economy is higher but there is a clear divide between Europe and the UK, where there are high levels of pessimism, and Asia and other developed economies. Confidence is highest in Asia and in non-Asian emerging economies.
3. Optimism about the prospects for respondents’ own companies is stronger than that for the global and domestic economies.
4. In terms of business expectations, revenue, profit, headcount and spending indicators all showed improvement in the last quarter overall. However Asia is showing deterioration in both expected revenues and profits, which will add to concerns over a slowdown in the Chinese economy.
5. Globally, 42% of executives said their company planned to take on more workers, an increase of 4 percentage points from last quarter. US companies are projecting a 2.4% increase, echoing recent positive official employment figures.
6. Technology and retail/wholesale trade expect the largest increase in headcount while banks expect to cut staff, albeit at a slower rate than in the last quarter. Construction is also expecting to increase headcount by 1.0% after projecting cut-backs at the end of 2011.
7. Concerns over inflation are highest in Asia, particularly over labour costs, while Europe and US executives are most concerned by raw materials’ costs. Energy costs are also a worry for both developed and emerging economies reflecting current concern over the oil price.
8. Executives give a greater than evens chance (52%) that Greece will leave the euro and 25% odds of full euro break-up. The vast majority of European companies (95%) say a break-up will have a significant or moderate impact on their business.
The CGMA Global Economic Index
The CGMA Global Economic Index is compiled as an aggregate of ten economic dimensions on a scale from 0 to 100, with 50 considered neutral and numbers above that indicating positive sentiment.
COMPONENT 4Q 2011 1Q 2012 CHANGE
Global economic optimism 22 37 +15
Country economic optimism 45 55 +10
Organisation optimism 66 71 +5
Expansion plans 68 75 +7
Revenue 70 76 +6
Profits 65 69 +4
Employment 55 61 +6
IT spend 64 70 +6
Other capital spend 62 66 +4
Training spend 62 71 +9
Composite Index 58 65 +7
