||Scale of the increase in business confidence indicates for many the corner has been turned;|
||BRIC economies well ahead of the global average and coming from a higher starting point; challenge of East versus West appears exacerbated. |
Hong Kong, 10 February 2010
Business confidence has come surging back across virtually all geographies and industries, according to the latest Business Outlook survey from KPMG International.
The latest figures - which reflect confidence in expected performance over the next 12 months - suggest that recent signs of economic improvement are no flash in the pan and that a global recovery could now be well under way.
The survey findings, compiled by research firm Markit Economics on behalf of KPMG International, show confidence in future business activity running at +42.9 in manufacturing and +46.5 in services1. For the US and the BRIC economies, those figures rise to +54 and +54.1 respectively in manufacturing and +65.6 and +51.9 respectively in services.
Similar numbers are posted for confidence around future new orders and business revenues. Despite all the cost pressures, even confidence around improved profits stands at +32.1 globally for manufacturing and +36.2 for services.
Prospects for increased employment in 12 months' time are slightly less rosy - at +7.8 for manufacturing and +16.9 for services - suggesting that the recovery has some way still to run before all companies start thinking about full recruitment once more.
Commenting on the results, Alan Buckle, Global Head of Advisory at KPMG, said: "The latest Business Outlook numbers clearly demonstrate that almost all of us have turned the corner in terms of economic recovery. In nearly all sectors and geographies, business leaders are expecting improvements in their earnings and their business environment. A strong majority sees business being better in 12 months time than now; something which is consistent with GDP forecasts."
"This represents a quite remarkable turnaround in business confidence; well above what we might have hoped for, especially in the U.S. Many people may find the extent of the optimism exhibited here somewhat surprising. However, it is also clear that problems still remain to be addressed in parts of Europe and in Japan."
Across some of the key survey variables such as revenues, new orders, activity, profits and employment, the European countries within the survey under-perform the global average by between eight and twenty points. Across both manufacturing and services sectors, Italy and the UK tend to be the best performers, with the latter almost certainly benefitting from currency issues over its euro-zone neighbours.
The Japanese numbers are far less heartening - with half of their variables still in negative / pessimistic territory. Yet it could be argued that even this represents a minor triumph for a country still struggling with deflationary pressures.
Before the developed markets get too carried away with talk of their own revival, it is worth remembering that different economies have started this bounce back from very different points on the confidence scale. As the survey's historic data shows, many Western companies which rather limped through the past few years were already some way behind their emerging market competitors whose spirits held up more robustly during the depths of the downturn - and who now appear even more confident about the upturn.
According to Alan Buckle, this may well have major ramifications for the East versus West challenge which characterised the run-up to the credit crisis. He explained: "Before the recession, Western companies were facing an increasing competitive threat from the emerging economies. Two years later, their competitors already have their eyes firmly set on a growth agenda while Western businesses are only just beginning to recover. Therefore, the challenge of dealing with the competitive threat of the East has not gone away. In fact, it has been exacerbated."
"The developing markets appear to hold the aces; robust local demand, strong business and government balance sheets and of course the cost advantages. So while in isolation, these results are comforting to businesses globally, it is clear that the threat to the West's business supremacy has increased as a result of the last two traumatic years."
- Ends -
1. The KPMG Business Outlook survey uses net balances to indicate the degree of optimism or pessimism for each of the survey variables. The net balance figure is calculated by deducting the percentage of respondents expecting a deterioration / decrease in a variable over twelve months from the percentage expecting an improvement / increase.
The Business Outlook Survey is produced by Markit Economics on behalf of KPMG and is based on a survey of around 11,000 manufacturers and service providers that are asked to give their thoughts on future business conditions. The reports are produced on a tri-annual basis, with data collected in February, June and October.
The countries covered by the survey are the US, Japan, Germany, the UK, France, Italy, Spain, Ireland, Austria*, the Netherlands*, Greece*, the Czech Republic*, Poland*, Brazil, Russia, India and China. (* manufacturing only)
Interest in the use of economic surveys for predicting turning points in economic cycles is ever increasing and the KPMG Business Outlook Survey is an independent report that uses an identical methodology across all nations covered. It aims to give a unique perspective on future business conditions from Global manufacturers and service providers.
The methodology of the KPMG Business Outlook Survey is identical in all countries that Markit Economics operates. The use of a widely recognised and well-regarded methodology ensures harmonisation of data, and allows direct comparisons of business expectations across different countries. This provides a significant advantage for economic surveillance around the globe and for monitoring the evolution of the manufacturing and services economies by governments and the wider business community.
Data collection is undertaken via the completion of questionnaires three times a year at four-month intervals. A combination of phone, fax, website and email are used, with respondents allowed to select which mechanism they prefer to use.
The KPMG Business Outlook Survey uses net balances to indicate the degree of future optimism or pessimism for each of the survey variables. These net balances vary between -100 and 100, with a value of 0.0 signalling a neutral outlook for the coming twelve months. Values above 0.0 indicate optimism amongst companies regarding the outlook for the coming twelve months while values below 0.0 indicate pessimism. The net balance figure is calculated by deducting the percentage number of survey respondents expecting a deterioration/decrease in a variable over the next twelve months from the percentage number of survey respondents expecting an improvement/increase.
Questionnaires are sent to a representative panel of around 11,000 manufacturing and services companies spread across the Global economy in the countries mentioned above. Companies are carefully selected to ensure that the survey panel accurately reflects the true structure of each economy in terms of sectoral contribution to GDP, regional distribution and company size. This panel forms the basis for the KPMG Business Outlook Survey. The current report is based on responses from around 6,200 companies.
KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 146 countries and have 140,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
KPMG International performs no professional services for clients nor, concomitantly, generates any revenue.
Markit is a leading, global financial information services company with over 1,300 employees. The company provides independent data, valuations and trade processing across all asset classes in order to enhance transparency, reduce risk and improve operational efficiency. Its client base includes the most significant institutional participants in the financial market place.
Markit Economics is a specialist compiler of business surveys and economic indices, including the Purchasing Managers' Index (PMI) series, which is now available for 26 countries and key regions including the Eurozone and BRIC. The PMIs have become the most closely watched business surveys in the world, favored by central banks, financial markets and business decision-makers for their ability to provide up-to-date, accurate and often unique monthly indicators of economic trends.