A jump in worldwide optimism resulting from improved global economic conditions has businesses preparing for growth in the coming months. According to the latest edition of Pulse – KPMG’s Global Business Outlook Survey, companies are planning for higher levels of investment, greater activity and increased staffing. This renewed outlook sharply contrasts the lows experienced by the global market in late 2011.
The latest survey results show that around 42 percent of manufacturers anticipate output growth during the coming 12 months. This is an improvement from the previous Pulse survey (conducted in October 2011), where only 27 percent of firms surveyed predicted growth. Back in February 2011, the corresponding figures were 53 percent followed by 46 percent in June 2011.
In the service sector, approximately 45 percent of companies anticipate higher activity in a year’s time. In October 2011, around 33 percent of firms predicted growth. In June 2011 it was 38 percent while in February 2011 it was 47 percent.
Commenting on the latest survey findings, Mark A. Goodburn, Global Head of Advisory for KPMG International said, “It would seem that the dark cloud expressed at the close of last year has lifted. While the Euro-zone crisis is far from over, globally, businesses feel as though it is at least under control. Additionally, strong gains in the US economy have further bolstered positive sentiment. It is apparent that markets are still vulnerable and businesses will proceed with caution, but considering the data, there is definite reason to be optimistic.”
Service providers are particularly optimistic, many of which are forecasting a growth in activity over the next 12 months. Similarly, in the manufacturing sector, confidence has climbed over the past several months following a steady growth of output.
Leading the rise in global business confidence is a jump in expectations among US companies, reflecting recent signs that the world’s biggest economy is picking up momentum. Business sentiment has also improved in the BRIC area, with Brazilian firms particularly upbeat
“Brazilian manufacturers have risen to the occasion to become the true standout in this most recent survey. While the strong domestic market has helped them weather the storm, anticipated increase in demand from key export markets in the coming months, has clearly buoyed confidence beyond what we saw late last year.” added Goodburn.
The mood in Europe meanwhile, has brightened following recent policy action to contain the region’s debt crisis. Significantly improved feelings of confidence and optimism are apparent in both Germany and the UK. Greece, in stark contrast, posts a further worrying deterioration.
Companies in Japan report little change in confidence, with firms seemingly resigned to continued sub-par growth over the coming year.
In line with forecasts for greater growth in activity, businesses anticipate modest increases in employment and plan to raise staffing levels at a stronger rate than previously reported. Firms in the US are planning the biggest increases in headcounts, followed by those in the BRIC area. Likewise, forecasts for company investment have been scaled up with projected growth set to be strongest in the BRIC region.
Over the next 12 months, global price pressures are expected to rise moderately contributing to a slight upward revision in the forecast rate of services output charge inflation. In the manufacturing sector, faster increases in both input costs and factory gate prices are also expected. The forecasted rates of inflation are broadly in line with the survey’s historical averages.
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About the survey:
Pulse – the Global Business Outlook Survey for worldwide manufacturing and services – is produced by Markit Economics on behalf of KPMG in the UK 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 latest survey was conducted between February 13 and 27.
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 KPMG’s Pulse survey uses an identical methodology across all nations covered. It gives a unique perspective on future business conditions from Global manufacturers and service providers.
The methodology of KPMG’s Pulse survey is identical in all countries that Markit Economics operates. This methodology seeks to ensure harmonization of data, and is designed to allow 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.
KPMG’s Pulse 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 signaling 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 Pulse survey. The current report is based on responses from around 6,300 firms.
Note to Editors:
KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 152 countries and have 145,000 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 2,300 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. For more information, see www.markit.com.
Markit Economics is a specialist compiler of business surveys and economic indices, including the Purchasing Managers’ Index (PMI™) series, which is now available for 32 countries and key regions including the Euro zone and BRIC. The PMIs have become one of 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. To learn more go to www.markit.com/economics.