In C-Suite, Pessimists Outnumber Optimists 8 to 1 on Outlook for Global Economy
Survey of Nearly 1,200 CEOs, CFOs and other Chartered Global Management Accountants Reveals Challenges for Global, U.S., U.K and other Regional Economies
Published October 04, 2012
New York and London (Oct. 4, 2012) – In C-suites and boardrooms around the world, pessimists now outnumber optimists nearly 8 to 1 as senior finance executives take an increasingly dim view of the global economy and show growing concern about regional conditions. That’s according to the third quarter CGMA Global Economic Forecast released today by the American Institute of CPAs and Chartered Institute of Management Accountants.
The survey of 1,179 CEOs, CFOs, controllers and other senior-level Chartered Global Management Accountants in 62 countries found only 7 percent with an optimistic outlook for the global economy over the next 12 months. The negative sentiment is taking a toll at home, with domestic conditions now topping the list of executive concerns. Indeed, a measure of optimism about one’s own country registered the sharpest decline in the core CGMA Economic Index — a composite of 10 equally-weighted factors on a 100-point scale — by falling 4 points. The United States led that fall with only 22 percent expressing optimism, down from 36 percent last quarter.
Even so, the CGMA Economic Index remained unchanged at 58 from the second quarter, when the ratio of pessimists to optimists on the global outlook was 5 to 1. More upbeat assessments for revenue growth and technology spending, mainly outside the United States, helped offset concerns about global and regional economies in the third quarter survey. Index readings of 50 are considered neutral with numbers above that signifying positive sentiment.
“Executives are mired in uncertainty,” said Arleen Thomas, CPA, CGMA and AICPA’s senior vice president for management accounting. “Many are guardedly optimistic about their own businesses but unsure about the political, regulatory and economic landscape around them. That is driving a pessimistic sentiment that is keeping the brakes on hiring and expansion.”
By several measures the outlook in the United States in particular grew grimmer this quarter. A minority, 45 percent, of CGMAs are now optimistic about their own organization’s outlook, down from 51 percent in the second quarter. Expectations for revenue, profit and employment growth also fell slightly, declines fueled in large part by CGMAs’ top concerns: uncertainty because of the upcoming elections, continued challenges in Europe and slower growth in China.
Among the forecast findings:
- Weak Employment Outlook: Expectations for employment increases continue to be marginal, with companies overall expecting a 0.7 percent increase in hiring over the next 12 months. U.S. CGMAs surveyed expect to boost employment by 1 percent, but that is below the 1.3 percent projection in the second quarter. Optimism is greatest in the technology sector, which expects to increase headcount by 2.9 percent. Retail trade has fallen off sharply from a projected increase of 3 percent in the second quarter to only a 0.6 percent increase in the third quarter survey.
- Revenue and Profits: The picture for both revenue and profits over the next 12 months is mixed. The overall expected increase in revenues over the next 12 months is up slightly from 2.7 to 3 percent, with all regions showing quarter-to-quarter improvement, except for the United States, which declined from 3.5 percent to 2.8 percent. Profit expectations overall increased slightly from 2 percent to 2.4 percent.
- Firms Expect More Difficult Access to Finance: While the percentage of respondents in Europe, the U.K. and the United States who expect financing to be more difficult next quarter increased, slightly fewer companies in Asia and emerging economies expect their financing to be more difficult. Europe now appears the most challenging with 34 percent now expecting their financing to be more difficult; the United States continues to be the least challenging with only 14 percent expecting more difficulty.
- Top Challenges: While global economic conditions topped the list of concerns in the second quarter, regional conditions have now taken center stage. CGMAs identified domestic economic conditions, domestic regulatory requirements/changes and domestic competition as the top three challenges their companies face. In the United States, the top three challenges identified by executives are domestic economic conditions, domestic competition and global economic conditions.
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