ACCA/IMA: Global economic confidence falls sharply amid growing trade tensions

11 October 2018

The latest Global Economic Conditions Survey (GECS) from ACCA and IMA has revealed confidence fell in the third quarter of 2018, it is lowest since the beginning of 2016. News flow about trade tensions has greatly impacted on confidence within the world’s biggest economies – the US and China.

Highlights of the latest survey include the following:

• While confidence fell by 20 points, it held up best in South Asia and Western Europe with falls of 2 and 6 points respectively. 
• But in both key regions of North America and Asia Pacific confidence fell by over 20 points; in Asia Pacific confidence is at its lowest since the start of 2016, in North America it is the lowest since the start of 2017.
• Confidence in the Middle East and Africa also fell sharply by 35 and 22 points respectively.
• Globally, 45 percent of businesses have considered a number of responses to a change in economic circumstances, such as cutting staff numbers or introducing a hiring freeze. Only 18 percent of businesses are considering increasing staffing levels – a drop by 2 percent in the last quarter.

ACCA’s head of business insights, Narayanan Vaidyanathan, says:

‘The world economy this year is on course for its strongest performance in seven years, boosted by a buoyant US.  Momentum going into 2019 will be positive but there are headwinds that will slow the pace of expansion as the year progresses. In the US the boost from tax cuts will fade and interest rates are likely to continue their gradual rise.

‘In China, growth is slowing down mainly as a result of recent monetary policy tightening introduced to slow credit growth. But the authorities may ease policy to support growth if trade tensions with the US escalate early next year. Policymakers appear to be finally recognizing recent rates of credit growth are unsustainable and a period of weaker economic growth is a price worth paying for a more secure financial system.

‘Prospects for the Eurozone remain positive; falling unemployment levels in many Eurozone countries is leading to higher wages, which is helping to support consumer spending., Meanwhile in the UK the economy is holding up well but Brexit uncertainty is extreme with less than six months before the due date for leaving the EU.’

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