US economic optimism spurring global confidence in its slipstream
Business optimism is globally on a high, according to a research by Grant Thornton, up from 38% in Q4 last year to 49% in the first quarter of 2017.
The findings, from the firm’s most recent quarterly global survey of 2,400 businesses in 36 economies (‘The International Business Report’), suggest that the new pro-business Trump administration is acting as a catalyst, releasing pent-up confidence after a long period of supportive monetary policy and cheap oil. In the US, business confidence among mid-market decision-makers surged from 54% in Q4 of 2016 to a 14-year high at 80%. Given the mid-market serves as the engine room for broader economic growth, the researchers point out that the US economy is facing a rosy outlook.
Francesca Lagerberg, a partner at Grant Thornton, says that despite the strong performance, it is still too early for US businesses to enjoy a positive impact on bottom lines. In fact, US business expectations for profitability have fallen from 55% to 52%. “Businesses await follow through on promises relating to spending, de-regulation and tax cuts, while stock markets continue to react to daily policy developments”, she remarks.
US neighbouring countries feel upbeat, too, as optimism in Canada rose from 33% to 59% and in Mexico from 8% to 32%. Countries across the European Union have seen a collective increase in optimism from 34% to 39% in the last quarter, despite the decision of the UK to leave the EU (‘Brexit’), while both Japan and Singapore have seen +20% improvements. The result for the UK echoes another recently released study, by Deloitte, which found that CFOs across the UK have become more upbeat about the future prospects of the UK business environment.
“As the world’s largest economy, US business confidence sends a shot of endorphins throughout the global market. It’s encouraging, therefore, to see that close neighbours and countries with strong trade links are also riding a new wave of hope”, comments Lagerberg.
The US as a catalyst
The research shows signs that many businesses globally are aiming to tap into the growing US market. One of the biggest providers of capital goods, German export expectations, have climbed from 22% to 35%, as a 9% rise in the number of US firms expecting to invest in plant and machinery – at its strongest since Q1 2014 at 41% – signals a desire to re-tool for the future.
Globally, export expectations are up from 16% to 18% over the past three months, with prospects improving particularly across the developed Asia-Pacific (+4% to 12%), the G7 (+3% to 17%) and the EU (+2% to 24%). Nigeria (+26% to 40%), Germany (+13% to 35%), the Netherlands (+12% to 30%) and Ireland (+10% to 28%) have seen the most improvement. The data also reveals global rises in expectations of investment in plant and machinery to 34% (+1%) and new buildings to 22% (+3%).
Lagerberg: “Growth in US investment expectations are clearly opening up opportunities for trade.”
Talent: a growing bottleneck
The report by the accounting and consulting firm further highlights challenges in the mid-market marketplace. Concern over a lack of skilled staff is cited as one of the major bottlenecks feared, with scarcity of talent at a two and a half year high of 33% and global hiring expectations up 3% to 32%. This is a particular problem in tight labour markets and in demand sectors, such as digital, engineering and data science, say the authors. In the UK for instance, unemployment has reached its lowest level in decades, putting pressure on talent strapped businesses seeking to capitalise on growth opportunities.
In light of this, businesses are advised to assess their export strategies over the coming years and consider how to take advantage of investment opportunities, taking into account the changing talent landscape, which is largely being affected by technology-led innovation.
According to a study by PwC, on the long run the main driver of global growth is shifting from developed to developing markets.
