Global economic conditions survey report: Q3, 2013 - ACCA

20 Pages·2013·0.48 MB·English

Global economic conditions survey report:
Q3, 2013
About ACCA
CONTACTS
ACCA (the Association of Chartered Certified
Accountants) is the global body for professional For further information about the Global Economic
accountants. We aim to offer business-relevant, first- Conditions Survey and the series of quarterly reports,
choice qualifications to people of application, ability please contact:
and ambition around the world who seek a rewarding
career in accountancy, finance and management. Wendy Towner
Head of Business Intelligence, ACCA
Founded in 1904, ACCA has consistently held unique [phone]
core values: opportunity, diversity, innovation, integrity [email protected]
and accountability. We believe that accountants bring
value to economies in all stages of development. We
aim to develop capacity in the profession and
encourage the adoption of consistent global standards. For further information about the technical and policy
Our values are aligned to the needs of employers in all issues raised in this report, please contact:
sectors and we ensure that, through our qualifications,
we prepare accountants for business. We work to open Emmanouil Schizas
up the profession to people of all backgrounds and Senior Policy Adviser, ACCA
remove artificial barriers to entry, ensuring that our [phone]
qualifications and their delivery meet the diverse needs [email protected]
of trainee professionals and their employers.
Dr Raef Lawson
We support our 162,000 members and 426,000 Professor-in-Residence and Vice President of Research
students in 170 countries, helping them to develop Institute of Management Accountants
successful careers in accounting and business, with the [phone]
skills needed by employers. We work through a network [email protected]
of over 89 offices and centres and more than 8,500
Approved Employers worldwide, who provide high
standards of employee learning and development.
About IMA®
IMA® (Institute of Management Accountants), the
association for accountants and financial professionals
in business, is one of the largest and most respected
associations focused exclusively on advancing the
management accounting profession. Globally, IMA
supports the profession through research, the CMA®
(Certified Management Accountant) program,
continuing education, networking, and advocacy of the
highest ethical business practices. IMA has a global
network of more than 65,000 members in 120 countries
and 200 local chapter communities. IMA provides
localised services through its offices in Montvale, N.J.,
USA; Zurich, Switzerland; Dubai, UAE; and Beijing,
China.
© The Association of Chartered Certified Accountants
N2ovember 2013
Global economic conditions
survey report: Q3, 2013
About the survey
The Global Economic Conditions Survey (GECS),
carried out jointly by ACCA and IMA, is the largest
regular economic survey of accountants in the
world, in terms of both the number of respondents
and the range of economic variables it monitors.
Its main indices are good predictors of GDP
growth in the OECD countries and daily trend
deviations correlate well with the VIX or ‘fear’
index, which measures expected stock price
volatility.
Fieldwork for the Q3, 2013 GECS was carried out between 15 August and
4 September 2013, and drew 2,021 responses from ACCA and IMA members
around the world, including 154 from CFOs. Readers should note that fieldwork was
concluded before the US government shutdown of October 2013 could become a
significant concern.
This is the eighth survey jointly carried out by IMA and ACCA and the nineteenth
since the series began in early 2009. As always, we are grateful to all ACCA and IMA
members who took the time to share their insights. As finance professionals, they
have front-row seats to the recovery, and their collective views can tell a more
complete and more accurate story than economic indicators alone.
GLOBAL ECONOMIC CONDITIONS SURVEY REPORT: Q3, 2013 3
Perceptions of the recovery are at a 4½–year high in Q3
Business confidence rose again in the Figure 1: Major GECS indicators for the global economy
third quarter of 2013, with 28% of
respondents claiming they were more
confident about the prospects of their 40 Confidence
own businesses than they had been 30 Recovery
three months earlier, up from 26% in
Government
Q2. Nearly a third (32%) reported a loss 20
of confidence, down from 35% in the
previous quarter. 10
0
While business confidence is still rising
modestly, perceptions of the recovery
-10
are improving at a very rapid rate. The
majority of respondents (53%, up from -20
47% in Q2) now believe economic
conditions are improving or about to do -30
so, while the pessimists’ share is down
-40
from 50% in Q2 to 43% in the third
quarter. Governments around the world
-50
are beginning to capitalise on the
recovery, with respondents rating their -60
economic policies higher again after a 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3
year of intense disapproval.
Putting these findings in perspective, it
appears as though faith in the recovery
was stronger in the third quarter of 2013 Figure 2: Major GECS indices – complete historical series (ACCA members only)
than it’s ever been since the GECS
began in early 2009 – it is also the first
20 Recovery
time in the history of the survey that the
optimists have outnumbered the 10 Confidence
pessimists. The same analysis reveals 0 Government
that business confidence has now
-10
reached levels last seen in the third
quarter of 2010 (see Figure 2). -20
-30
-40
-50
-60
-70
-80
9 9 9 9 0 0 0 0 1 1 1 1 2 2 2 2 3 3 3
0 0 0 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3
Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q
4
Business confidence is over-reliant on easy money
Figure 3: How sensitive is global business confidence to the fundamentals? Once again, perceptions of the recovery
improved much faster in Q3 2013 than
business confidence, which in turn
usiness confidence of a sizeable (1 hange in underlying fundamentals 000000......223344050505 IPABDnrucevicsmceeiesnas teasnmsn dtsdeo a no FgntpXr dpoo rocpwaarptttseohuh r nscfttliauotaipnwebiisittlaiietlys ifwbdsiiwammnutnueoaivnmyppsprerdtnilrresnudhooaetneli.mmvvudn dsTeesg eseethdd, ,h nncd iw isafatton aah otcdonc slicnmscerfiptee. ehdp apusaOr ee cwo ssstunn heurhtatrcd odraso ugeQ e n fgnri e nne at2irt tch fltoho ti 2eeeehtewf0h s ce mhgtu1 et haa3tern or hogs dcdonr,iwl ear eoueiidfppntrnbt h la ioqdyat raiiru lnny ttlla h geare vnt eedlr ,
bc
effect on devation) 0.15 btrehuaets wtohone r flflodor, wgth ooisnf ebc eainphtaiotva irloe huvaer sra,s pienp. mTeahurecs ht oo fb e
d d 0.10 a major shift in demand for riskier assets
arar
dd as investors adjust to the prospect of
nn
Stasta 0.05 central banks reining in their asset
purchases, and monetary policy in
0.00 general.
-0.05 As Figure 3 shows, business confidence
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 around the world has become
2011 2012 2012 2012 2012 2013 2013 2013
increasingly sensitive to the supply of
investment opportunities, access to
capital for investment and predictable
monetary policy over the last 12
months.1 On the other hand, the
influence of business opportunities has
risen only moderately and that of
demand and cashflow conditions has
fallen. Indeed, both of the latter two
factors fell in significance in Q3 2013.
1. The five indices (business opportunities;
investment opportunities; demand and cashflow;
price and FX rate stability; and access to growth
capital) are derived through factor analysis from
the full range of 30 GECS questions regarding the
state of the business and investment environment.
The factors’ individual effects on business
confidence are determined through ordinal
regression analysis, after controlling for business
size, complexity, sector and country, as well as
respondents’ role and gender, and their
perceptions of the recovery. The use of varimax
rotation ensures that the five indices are
uncorrelated, which means that ‘investment
opportunities’ do not include opportunities to
invest in organic growth, which are instead
summarised under ‘business opportunities.’
GLOBAL ECONOMIC CONDITIONS SURVEY REPORT: Q3, 2013 5
This picture is not consistent with a Figure 4: GECS Business Dynamism Indices in OECD countries
healthy global recovery. While it is
positive to see confidence respond to
investment conditions, these indications 0 Investment (capital)
paint a picture of a recovery
Investment (Staff)
increasingly dependent on current and
Orders
future monetary stimulus. As the Bank
for International Settlements (BIS) -10 Employment
explained2 in its September 2013
outlook:
‘Announcements in May that the -20
Federal Reserve envisaged phasing out
quantitative easing…triggered a surge
in benchmark bond yields that spilled
over across asset classes and regions. -30
…The sell-off abated in early July when
the Federal Reserve, the ECB and the
Bank of England reassured markets that
-40
monetary policy would remain
accommodative until the domestic
recovery was on a solid footing. As the
rise in long-term interest rates
-50
continued, however, markets effectively
2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3
precipitated a tightening of financial
conditions worldwide.
Figure 5: GECS Business Dynamism Indices in non-OECD countries
The policy announcements occurred
after a prolonged period of exceptional
monetary accommodation in advanced
0
Investment (capital)
economies, just as the economic
outlook there was turning positive. They Investment (Staff)
caught markets by surprise, reminding Orders
them that negative term premia cannot
-10 Employment
last indefinitely.’
-20
-30
-40
2. Quarterly Review Q3 2013, BIS, 2013, -50
<http://www.bis.org/publ/qtrpdf/r_qt1309.pdf>. 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3
6
Emerging markets are getting a taste of the taper
Figure 6: Business opportunities reported by finance professionals, by type If this stimulus was meant to support
capital spending by businesses, there is
little doubt of its effectiveness over the
100
last year (see Figures 4 and 5). But it is
Value added opportunities only
90 also clear that, while some major
Mixed opportunities
Western economies continued to
80
Cost cutting only benefit from stronger investment and
70
employment than at any time in at least
60 eighteen months, emerging markets
saw many of the last year’s gains
50
compromised in the third quarter of
40 24 26 25 24 25 26 24 2013. In those countries, investment,
30 19 employment and orders all fell over the
last three months, even though they
20
19 20 20 18 17 18 19 17 were still up significantly year on year.
10
0 6 7 6 7 5 7 6 6 A final cause for concern is the decline
2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 in business opportunities in the third
quarter of 2013, which suggests that
new orders and investment could
continue to weaken (Figure 6). The
proportion of finance professionals who
saw value-added opportunities of any
Figure 7: Cashflow and demand challenges in the non-OECD countries
kind for their organisations fell across
almost all of the major regions in the
third quarter of 2013; from 43% to 41%
in OECD countries, and from 49% to
42% in emerging markets. Professionals
in the OECD countries mainly saw a
reduction in purely value-added
opportunities (ie not including cost
cutting), while those in emerging
markets mostly saw fewer opportunities
to improve efficiency.

GLOBAL ECONOMIC CONDITIONS SURVEY REPORT: Q3, 2013 7
Europe turns a corner as emerging markets falter
The Q2 2013 GECS report warned that Figure 8: GECS Recovery Perceptions Index for the major regions
this is was unlikely to be a recovery for
everyone. This remains the case
50
although the tables have turned for Africa
some of the leaders of the recovery. As Middle East
Europe appears to have finally emerged 25 North America
from recession and a severe credit
South Asia
crunch, the exodus from emerging
Western Europe
market bonds and assets is threatening
to plunge much of emerging Asia, 0 Caribbean
Africa and the Middle East into a credit CEE
crunch of their own. Asia Pacific
-25
The strongest performers in the third
quarter of 2013 have been markets in
-50
Europe (both eastern and western) as
well as the Caribbean: here business
confidence has rebounded following a
-75
prolonged credit crunch, and
businesses have taken advantage of the
renewed access to finance in order to
-100
invest in capital and staff. In Europe,
2011 Q42012 Q12012 Q22012 Q32012 Q42013 Q12013 Q22013 Q3
these developments have gone hand in
hand with improved perceptions of the
broader economic recovery, although
this has not been the case in the Figure 9: GECS Growth Capital Access Index for the major regions
Caribbean.
25 North America
The Asia Pacific region lies at the other
Caribbean
extreme of business fortunes. Here,
business confidence is down, access to CEE
growth finance has tightened Western Europe
0
dramatically and business investment is Middle East
beginning to fall, as a result of an South Asia
investor exodus and deepening Asia Pacific
liquidity crisis that is testing the Africa
endurance of China’s banking sector -25
and the businesses that depend on it.
Despite a rising tide of economic
sentiment around the globe,
respondents in this region felt that -50
economic recovery was further out of
reach in the third quarter of 2013.
-75
2011 Q42012 Q12012 Q22012 Q32012 Q42013 Q12013 Q22013 Q3
8
Figure 10: GECS Capital Spending Index for the major regions A similar shift was evident in South Asia,
where respondents were less optimistic
about their national economies, but
0 Middle East
were more or less holding on to past
Western Europe
-5 levels of business confidence. Despite a
Caribbean
-10 Asia Pacific tightening supply of finance,
North America government spending was still
-15
South Asia propping up capital spending in much
-20 CEE of the region, although this dynamic
-25 Africa was looking increasingly unsustainable.
-30
Worryingly, and despite increasing
-35 optimism about the state of national
-40 economies, both business confidence
and capital spending were down
-45
throughout Africa, reflecting the way in
-50 which investment turned away from
2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3
emerging markets in the third quarter
of 2013. Africa remains the most
optimistic of the major regions, but lags
behind much slower-growing regions
for business confidence and access to
finance. The latter is a particularly
worrying development – some of the
world’s most promising economies are
unlikely now to get the investment they
need to realise their promise for years
to come.
GLOBAL ECONOMIC CONDITIONS SURVEY REPORT: Q3, 2013 9
Spending is back on the menu
The Q2 2013 GECS report noted with Figure 11: GECS Government spending indices in selected markets
some concern that a number of
erstwhile ‘big spenders’, countries with
100 Q4 2011 to Q1 2012
high and growing levels of government
80
spending, were beginning to rein in Q2 2012 to Q3 2012
public spending in response to 60 Q4 2012 to Q1 2013
strengthening domestic economies or 40
Q2 2013 to Q3 2013
poor public finances. This pattern has 20
changed somewhat in the third quarter:
0
for instance, respondents in the US now
-20
expect further increases in public
spending in the medium-term and -40
Canada is now once again part of the -60
‘spenders’ group, while countries such
-80
as Ireland and the UK are slowly exiting
-100
their fiscal adjustment programmes (see
Ireland UK Canada USA UAE Singapore
Figure 11). Russia and China remain
likely to rein in public spending in the
medium term (see Figure 12), but even
here changes are now expected to be
more modest. It is also worth noting
that expectations of government
spending in the US are likely to rise
further following the resolution of the
US shutdown.
Figure 12: GECS Government spending indices in selected markets
60
Q4 2011 to Q1 2012
50
Q2 2012 to Q3 2012
40
Q4 2012 to Q1 2013
30
Q2 2013 to Q3 2013
20
10
0
-10
-20
-30
-40
China Russia Australia
10