Daily Research News Online no. 1982 - Confidence in Global Economy Falls Sharply

Confidence in Global Economy Falls Sharply

November 6 2002

Senior executives in Europe are downbeat about the outlook of the global economy over the next 12 months, according to research published this week by Taylor Nelson Sofres (TNS) in consultation with Deloitte Consulting.

The proportion of senior executives in Europe who believe that 'global economic conditions will improve' over the next 12 months decreased by around 15 per cent in the last quarter. This contrasts with an increase of almost 10 per cent amongst executives in North America over the same period of time. However, it is considerably more optimistic than the decrease of 51 per cent seen in the expectations of executives in Asia Pacific.

The study questions more than 600 CEOs, CFOs, COOs, CIOs, Heads of Strategy and Tax Directors every quarter from leading companies in Asia Pacific, Europe and North America.

The study found that 19 per cent of senior executives in Europe believe 'that global economic conditions will get worse over the next 12 months' compared with 11 per cent who felt this in Q2 and 10 per cent in Q1. In contrast, only five per cent of executives in North America believe that conditions will worsen, compared with almost half (45 per cent) in Asia Pacific.

Gilbert Toppin, European Operations Director, Deloitte Consulting, commented 'The outlook in Europe falls between the guarded optimism shown by executives in North America and the strong pessimism displayed in Asia Pacific. This outlook may, in fact, simply reflect a realisation of the actual economic situation rather than a fear that things are going to get significantly worse over the next 12 months. It is clear that many European economies have been facing slowdown for some time but it is only now that they are starting to wake up to it - the findings partly reflect an adjustment of the higher levels of confidence shown earlier in the year. In addition, the uncertainty over the political and military situation in the Middle East and the limitations that an escalation of this situation could pose on travel and the movement of goods is also having an impact on general levels of confidence. At the same time, the relatively self-contained nature of the EU may be helping to keep confidence levels higher compared with Asia Pacific where economies are more directly linked to economic issues affecting the North American marketplace.'

Other key findings include:

Globally, respondents from companies with revenues of less than US$1 billion were almost twice as likely to think that global economic conditions will get worse in the next 12 months compared with those from companies with revenues of US$3 billion or more. In addition, confidence amongst those in companies with sales of less than US$1 billion showed the most dramatic decline between Q2 and Q3 with an increase of 19 percentage points in the proportion of businesses predicting that global economic conditions will get worse.
The most pessimistic business sector globally was heavy industry with more than a third (37 per cent) of respondents in Q3 saying there would be a decline in the global economic climate over the next 12 months. None agreed with this statement in Q1 and Q2. In contrast just 12 per cent of respondents from financial the services sector felt that economic conditions would deteriorate.
Optimism about future global economic conditions appears most consistent in Switzerland and France over the last three quarters and most variable in Benelux countries and the UK.
CEOs and Tax Directors demonstrated the most significant decline in confidence since Q1 at the global level, with Heads of Strategy and CIOs emerging most optimistic over the past three quarters.

David Racadio, Director TNS Professional Services added 'The 'Global Economic Confidence Barometer' reveals wide fluctuations in attitudes and confidence about the future performance of the world economy at a regional level, as well as across different market sectors. The study also demonstrates how quickly the views of senior business people can adapt to the uncertain conditions of the marketplace.'

The Global Economic Confidence Barometer (GECB) measures the optimism of more than 2,500 business people annually who drive the global economy, (CEOs, CFOs, COOs, CIOs, Heads of Strategy and Tax Directors) from the world's largest companies across 13 markets. It is conducted quarterly by Taylor Nelson Sofres (TNS) in association with Deloitte Consulting.

All articles 2006-22 written and edited by Mel Crowther and/or Nick Thomas unless otherwise stated.