After a dip in confidence four months ago which raised doubts
over the sustainability of the global economic recovery, optimism again appears
to be back in fashion across virtually all key markets. However, events in
Japan, Middle East and North Africa are not factored in.
The latest edition of Pulse– the Global Business Outlook
survey from KPMG International - reveals that global business optimism around
several key indicators now stands at the highest levels ever recorded by the
The Spring 2011 Pulse survey, compiled by research firm Markit
Economics on behalf of KPMG International, also shows that confidence across
Europe and the US finally appears to be approaching parity with their BRIC
In the Winter 2010 Pulse survey, falls of between six and ten
points were recorded across many key indicators such as activity, revenues and
new orders. Many of those losses have now been recouped. For example, in the
services sector, 55 percent of respondents predict an improvement in business
activity in the next year. Just eight percent predict a decline; creating a net
balance of +47, up from +36 last time around. Similarly strong – and improving -
net balances were also recorded against new orders (+42), revenues (+39),
profits (+35) and even employment (+19), which has typically lagged all other
indicators throughout the recession.
The story is even more promising in the manufacturing sector
with four of the top five indicators all recording record highs since the Pulse
survey became global in October 2009. Net balances for business activity and new
orders both passed the +50 mark, with revenues not far behind at +49. Employment
optimism also hit its record mark at +25. At +36, optimism around increased
profits may not be at a survey-high point but this figure still represents a
nine point improvement from Winter 2010.
Commenting on the latest survey findings, Alan Buckle, Global
Head of Advisory at KPMG, said: "I think the most encouraging aspect of these
numbers is that the recovery is worldwide. However, while the survey takes some
account of events in North Africa and the Middle East, we have yet to see
the impact of the tragic events in Japan. The global figures look strong but the
US numbers have also rebounded to the levels of last summer while the European
numbers have surged even further ahead than that. China and the other high
growth economies are no longer alone to blaze the recovery trail. As long as
that was the case, the economic recovery always felt somewhat fragile as it
lacked wholesale support from the world’s two biggest economic blocs. With
Europe and the US now appearing to be properly on board, the recovery feels more
robust. However we need to see what the impact is of global events --
particularly in Japan."
Unsurprisingly, some problems still remain with inflation
appearing to be a key hindrance. In manufacturing for example, belief that input
prices will rise in the coming year stands at +47. This is up 17 points from
Winter 2010 as increasing commodity prices make their presence felt. Belief that
such rises can be passed on via higher output costs is also up 13 points but
this still only results in a net balance of +31.
Within the service sector, the trend is the same although the
numbers are slightly more muted. The net balance of those expecting input prices
to increase rose from +21 to +24 whereas the net balance of respondents
expecting to be able to charge higher prices stands at just +15.
Alan Buckle continued: "Prior to recent events in Japan the main dampeners
of optimism were the problems of rising commodity prices, the fear of inflation
and the need to still bring deficits under control. However, I get more of a
feel now that companies are prepared to simply get on and deal with such things.
Let’s hope that for business as well as human reasons, events in Japan are
quickly under control and this confident survey isn’t invalidated."
Pulse - - the Global Business Outlook Survey for worldwide
manufacturing and services - is produced by Markit Economics 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 latest survey was conducted between February 11 and 25.