Global confidence in Q3 fell to its lowest level since 201, according to a worldwide survey of more than 1,000 senior accountancy experts on economic condition.
The report Global Economic Conditions Survey—jointly published by ACCA and IMA (Institute of Management Accountants)—reveals that global employment and investment intentions also declined, pointing to a slowing world economy heading into 2020.
Highlights of survey results
- There has been a convergence of confidence at low levels across regions: Asia Pacific is at the bottom, reflecting the effects on the region of continued slowdown in China.
- South Asia economic confidence dropped in the latest survey, with an especially large fall in India, where the economic outlook has deteriorated considerably in recent months.
- Global orders were unchanged in Q3, steady at a three-year low, but they are not signalling recession in the world economy.
- Cost pressures at the global level eased for the fifth quarter in a row, suggesting further scope for monetary easing by many central banks.
- The US orders index fell in Q3 and is pointing to slower growth into 2020 but recession is unlikely.
- Confidence and orders weakened in Western Europe where the euro-zone is particularly vulnerable to the downturn in global trade.
- Brexit uncertainty continues to hold back business investment in the UK ahead of the October 31 deadline for leaving the European Union.
- Confidence in the Middle East fell to its lowest level in a year, hampered by geopolitical risks in the region.
Michael Taylor, chief economist at ACCA, warned that risks to the global economy have increased in recent months.
The fall in confidence this quarter is not surprising, given the escalation in the US-China trade war, evidence of continued slowdown in China, increased geopolitical risks in the Middle East and the possibility of a no-deal Brexit, he said.
In emerging markets, growth in economies especially those heavily dependent on exports, is slowing, according to ACCA.
Global trade growth has softened even more than global economic growth over the last couple of years, hurting many emerging markets, Taylor observed.
Some good news
‘The good news is that reduced concerns about inflation, highlighted in the report means that monetary policy is being eased,” Taylor pointed out. “Significantly, the US Fed has already cut interest rates by half a percentage point and is likely to do more by year-end.”
Many other central banks have followed suit, improving monetary conditions in emerging markets, he said, adding that easier monetary policy and buoyant jobs’ markets in many economies are the case for the global economy avoiding recession.”
While investment has weakened, Raef Lawson, Ph.D., CMA, CPA, IMA vice president of research and policy said the consumer is relatively buoyant.
The GECS orders index is consistent with GDP growth of between 1% and 1.5% annually in the second half of the year, he noted.
Imminent recession in the US highly unlikely
However, confidence is still at a very low level, close to the all-time low, undermined by the trade war with China and a slowing global economy, Taylor said.
Orders fell further in the third quarter and are now consistent with US growth slowing to an annual rate of between 1% and 1.5% into 2020., he added.
Despite the numbers, Taylor said an imminent recession is highly unlikely in the US in this year or next.