The latest Global Economic Conditions Survey (GECS) from ACCA (the Association of Chartered Certified Accountants) and IMA (Institute of Management Accountants) has revealed global economic confidence declined for the third consecutive quarter in Q4 2018 and is now at an all-time low.
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GECS is the largest regular economic survey of accountants around the world, in terms of both the number of respondents and the range of economic variables it monitors.
There are signs of growth beginning to weaken in the world's three biggest economies: the U.S., China, and the Eurozone, but the global orders balance was little changed in Q4 and remains consistent with reasonable overall expansion in the global economy in the first half of
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All of the key regions recorded a negative confidence score—there were more people pessimistic about the outlook than optimistic—with the lowest score being recorded in Western Europe and the Caribbean.
The most confident—or rather least pessimistic—part of the global economy was again South Asia, followed by Africa and North America.
In a reflection of the less upbeat outlook, 47% of survey respondents globally are considering laying off staff, with just 18% considering taking on new workers. Meanwhile, 39% of respondents are considering scaling back investment in new capital projects, compared with just 16% who are looking to increase investment in new projects.
Higher mortgage interest rates are cooling house building activity for example.
But the jobs market remains extremely buoyant which will underpin robust consumer spending in coming months. Despite falling in Q4 the GECS orders balance for the U.S. is still consistent with annualised Gross Domestic Producer (GDP) growth of around 2.5% in the first half of 2019. Recession this year is extremely unlikely.
Trade tensions remain a downside risk, notwithstanding the truce and current negotiations with China.
Even at maximum level U.S. tariffs on Chinese imports will have a modest direct effect on the U.S. economy. But on top of this there is the indirect effect of greater uncertainty created by trade tensions and this has been at least one factor in recent stock market volatility.
Except for government spending, all the major sub-components fell, including a sharp drop in capital expenditure and a slight decline in employment, reflecting the health of the country's jobs market. ■