Economic Forecast Shows Cautious Optimism for the Year Ahead

Jack Humphrey, Regulatory journalist
March 30, 2012 /

The world’s CEOs, CFOs and other senior management accountants have a cautious, yet increasingly positive outlook for the global economy over the next 12 months, according to the first CGMA Global Economic Forecast released today by the American Institute of CPAs (AICPA) and Chartered Institute of Management Accountants (CIMA).

The quarterly forecast polled 600 management accountants from more than 60 countries on global and domestic economic conditions and the outlook for their organizations.

The CGMA Global Economic Index – a comprehensive gauge of executive sentiment within the Forecast – rose 7 points to 65 from a baseline reading of 58 established during a fourth quarter 2011 survey. The Index is a composite of 10 equally weighted survey measures on a scale from 0 to 100, with 50 considered neutral and numbers above that signifying positive sentiment.

While all factors in the Index rose, the global economic optimism component registered the most significant gain, rising 15 points from the fourth quarter. However, the current reading of 37 reflects continued concern about the global economy. Only 18 percent of respondents expressed optimism, ranging from 22 percent in the U.S. to just 12 percent in Asia. Still, that’s up from last quarter when 9 percent of all respondents said they were optimistic about the global economy.

“Management accountants are in a unique position to assess the future of the global economy as they drive the strategic and financial decisions of their companies,” said Arleen Thomas, CPA, CGMA and AICPA senior vice president for management accounting.

“In aggregate, the CGMA Global Economic Index rose seven points from last quarter, indicating an important and positive economic trend. In the U.S. the story is even stronger, with organizations feeling increasingly confident about the overall domestic economy, as well as prospects for their own businesses.”

In the U.S., 44 percent of management accountants surveyed are optimistic about the domestic economy, compared to 23 percent in the prior quarter. Asked about their own organizations, 58 percent of U.S. respondents are optimistic about prospects for their companies, an increase of 8 percentage points over last quarter.

“Management accountants work where finance and business strategy meet and so are perfectly placed to assess the future from both a micro and macro level,” said Charles Tilley, CIMA’s chief executive.

“Whilst it’s great to see that overall, confidence is up on the last quarter, when you look at the underlying factors there is a marked difference between how they feel about their own organization’s ability to succeed in continuing challenging times and their confidence in the domestic and global economy to emerge from the gloom. However, many are predicting some growth in revenue, profits and spending which is encouraging.”

The global expected revenue increase for the coming 12 months is now 4.1 percent, up from 3.1 percent last quarter. In the U.S. this number is 4.8 percent, up from 3.4 percent last quarter. The global expected increase in profits also improved, moving from 2.4 percent in the fourth quarter of 2011 to 3.5 percent this quarter. In the U.S. this number is 3.8 percent, up from 3 percent last quarter.

Globally, 42 percent of respondents said their organization plans to increase their number of employees in the coming year, an increase of 4 percentage points from last quarter. In Asia, 53 percent of respondents said their organization plans to increase their number of employees in the coming year.

This compares to 49 percent last quarter. In the U.S., 43 percent of respondents said their organization plans to increase their number of employees in the coming year. This compares to 45 percent last quarter. In the UK, 40 percent of respondents said their organization plans to increase their number of employees in the coming year. This compares to 33 percent last quarter.

In Europe, 33 percent of respondents said their organizations plans to increase their number of employees in the coming year. This compares to 23 percent last quarter.

Two-thirds (66 percent) of global respondents expect their business to expand at least somewhat in the coming 12 months. In the U.S. this number is 68 percent.

Domestic economic conditions, global economic conditions, and domestic competition topped the list of challenges for respondents’ organizations on an overall basis this quarter. In the U.S., the top three challenges are domestic economic conditions, regulatory requirements / changes and domestic political leadership. In the U.K., the top three challenges are domestic economic conditions, global economic conditions and domestic competition.

In Europe the top three challenges are global economic conditions, stagnant / declining markets and developing new products / services / markets.

In Asia the top two challenges are global economic conditions and inflation. Employee / benefits costs and the availability of skilled personnel tied for third.

From an industry sector perspective, 63 percent of manufacturing respondents are now optimistic about their own companies, followed closely by those in finance and insurance (62 percent). Significantly more than half of respondents in the retail and wholesale trade (59 percent) and technology sectors (55 percent) are also optimistic. Exactly half (50 percent) of respondents from banking, and slightly more than a third (37 percent) of construction industry respondents are now expressing optimism.

 

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