A jump in worldwide optimism resulting from improved global economic conditions has businesses preparing for growth in the coming months. This renewed outlook sharply contrasts the lows experienced by the global market in late 2011.
Tony Thompson, Deputy Senior Partner and CIS Head of Advisory of KPMG in Russia and CIS commented to the latest edition of Pulse – KPMG’s Global Business Outlook Survey: “The survey confirms what our Russian clients are telling us. Increased optimism regarding the global economic outlook together with a stable political environment has driven confidence to higher levels in the recent past. This is driving increasing levels of investment across all sectors. I would, however, underline the issue of high inflation affecting a wide range of input costs as the biggest threat going forward to Russian business, in addition of course to global macroeconomic factors.
Leading the rise in global business confidence are improved expectations among US companies early this year. Business sentiment has also improved in the BRIC area, with Brazilian firms particularly upbeat. 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.
There is a perceptible growth in business confidence in Russia both in the production and service sectors. Expectations regarding new business volumes are the highest since February 2011. Russian goods producers expect to raise workforces on average over the next 12 months. The overall degree of positive sentiment regarding job creation is the strongest since February 2011.
At the same time, inflation expectations remain the highest in the global outlook survey, both in terms of input costs and factory gate prices.
In the services sector the number of Russian companies anticipating an increase in business activity has reached its highest level since October 2010. Russian companies in the services sector are positive about employment prospects.
Russian companies in the services sector cited among favorable opportunities for business development optimization of the organizational structure, an increase in the quality of services, the development of new types of services, accessing new markets and investments in human capital. In the opinion of respondents, the risks to the state of the economy are related to a possible global recession, taxation and legislation.