|Source: Markit Economics
The latest KPMG Global Business Outlook Survey shows that
optimism at companies around the world has held steady since the last survey in
February. Both manufacturers and service providers remain confident of rising
activity during the next twelve months, supporting growth of revenues and
profits. Positive sentiment regarding employment has increased, but inflation
expectations have also risen modestly. Irish service sector companies expect
revenues, new business and job creation will all improve over the next 12
months. KPMG says sentiment on business activity in the service sector is
well ahead of the EU and global average, according to a survey produced by
research firm Markit Economics.
KPMG Ireland's David Kennedy commented: "Improving service
sector optimism is founded on the improving global outlook and increased
confidence that the Irish economy and Irish businesses have responded well to
the challenges brought about by the downturn. That output prices are expected to
continue falling reflects an across-the-board commitment to maintaining and
improving Ireland’s competitiveness. Reduced competitiveness was at the core of
many of Ireland’s problems over the past 24 months and this is increasingly
being accepted across both the private and public sectors. The recent agreement
by the public sector unions to a wide-ranging pay and transformation programme
underscores this commitment. Alongside equivalent measures
in the private sector, this is seen as an important catalyst for a return to
Growth expectations remain intact: Companies across the
globe continue to hold a positive outlook for business activity during the next
twelve months. In the manufacturing sector, a net balance of +49.9 firms
anticipate a rise in activity, compared with +50.9 in the last survey conducted
in February. The equivalent figure for the service sector is +43.9,
little-changed from the previous reading of +44.0.
Of the major economic regions, confidence remains highest in the
US, where sentiment has improved slightly since February. BRIC companies
continue to signal an upbeat outlook, but their optimism has slipped back since
February. EU firms again indicate solid growth prospects, while Japanese
panellists’ confidence has strengthened compared with the previous survey but
remains below the global average.
Anecdotal evidence suggests that optimism regarding future
activity is linked to signs of continued recovery in the worldwide economy.
Additionally, business opportunities are set to arise from product innovation,
the development of new markets and, in some cases, the weakening of competitors
during the global downturn.
All industry sectors are set to record higher activity during
the coming year. In manufacturing, the strongest rates of growth are anticipated
in Electrical & Optical, Mechanical Engineering and ‘Other Manufacturing’, while
the slowest rise is forecast in the Transport category. In services, confidence
is highest in the Renting & Business Activities and Financial Intermediation
sectors, while optimism is lowest amongst Hotels & Restaurants.
US firms signal marked optimism: As was the case in
February, companies in the US report a substantial degree of confidence
regarding future activity. For manufacturing, June’s net balance of +69.3 is the
second-highest of all surveyed countries, while the figure for services is
+61.2, topping the global ranking. US companies generally attribute their
optimism to expectations of continued economic recovery during the next twelve
BRIC growth expectations ease amid China slowdown:
Although still forecasting a brisk pace of expansion, companies in the BRIC
region have become less optimistic than in recent outlook surveys. June’s net
balance for manufacturing is +45.7, the lowest since January 2009, while the
services reading of +46.8 is the weakest of the past three outlook periods. In
both cases, the drop is in large part driven by an easing of optimism in China,
where policy tightening to cool the economy has led to a dampening of near-term
growth prospects. Chinese firms are now the least upbeat in the BRIC area.
Brazilian panellists continue to signal buoyant expectations for
growth. June’s net balance of +77.1 for manufacturing is the highest of all
countries covered by the survey, while the services figure of +50.2 is the
third-highest in the world.
Confidence has grown in India, where positive sentiment is
higher than at any time since mid-2008. In Russia, manufacturing confidence has
eased slightly but remains strong, while optimism in the service sector is the
second-highest across the globe.
Alan Buckle, Global Head of Advisory, KPMG said: "This all
adds up to a growing feeling of a quality upturn; the sort of upturn which was
hinted at in the previous Outlook survey but which needed further evidence of
sustained confidence, increased investment and improved employment prospects
before it felt convincing.
"While not providing us with any dramatic swings in the
headline confidence numbers, the latest survey nevertheless provides some
comfort that recent reports of weakening activity should prove temporary. Almost
inevitably though, some doubts remain. While confidence in the West is strong in
manufacturing - - helped by global demand and, in some cases, falling currency -
confidence in the service sectors is weakening and this is a significant drag on
countries such as Spain and the UK which have a small manufacturing base."
The Global Business Outlook Survey for worldwide
Manufacturing and Services is produced by Markit on behalf of KPMG 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 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 Global Business
Outlook Survey uses an identical methodology across all nations covered. It
gives a unique perspective on future business conditions from Global
manufacturers and service providers.