Improved revenue and promising growth in demand have raised business optimism globally over the past three months, according to the Grant Thornton International Business Report.
April 24, 2012
by PLANT STAFF
TORONTO: Improved revenue and promising growth in demand have raised business optimism globally over the past three months, according to the Grant Thornton International Business Report (IBR).
However, the latest instalment of the quarterly survey of 3,000 businesses in 40 countries, notes that despite the pick-up, businesses remain less optimistic than they were at this time last year, underscoring the fragile state of the global economic recovery.
The improvement is most apparent in the G7 economies, where business optimism rose by 28% points over the past three months, climbing from -12% in Q4-2011 to 16% in Q1-2012. Much of the gain can be attributed to the US, where optimism jumped from just 1% in Q4-2011 to 46% in Q1-2012.
Pessimism remains in Japan (-53%) and Europe (-4%), though the business services firm said both have seen improvements over the last quarter.
Numbers from the past 12 months tell a more sobering story. This time last year, optimism in the G7 economies stood at 27%, 11 points higher than the Q1-2012 figure. Indeed, only in Japan and the US have levels of business optimism recovered to where they were in Q1-2011.
Canada rose to 51%, up five points over last quarter, when it dipped to 46%. Nevertheless, it has not rebounded to the high of 80% seen in the second quarter of 2011.
“It’s definitely encouraging to see that the outlook of many businesses has improved over the past three months, particularly in Canada; however, reflecting on the last year or so, and in particular the results from this time last year, we can see how much global growth prospects remain delicately balanced and how difficult the last 12 months have been around the world,” said Bill Brushett, national client services leader for Grant Thornton LLP in Canada.
The IBR data also reveal that businesses in mature markets are much more positive about growing their business over the next 12 months. Business expectations for increasing revenues (up 9%) and profits (up 8%) in the G7 have grown robustly over the past quarter, while 8% fewer businesses are citing a lack of demand as a constraint on growth.
There are also signs of increasing business investment across the G7 with 6% more businesses expecting to boost plant and machinery, and 3% more planning investment in new buildings.
In Canada, 57% expect to see revenues increase (up 8% over last quarter), but only 18% expect to invest in research and development. Further, a lack of skilled workers continues to be the biggest constraint to growth, cited by 38% of businesses in Canada.
Improvements among G7 nations raised their optimism by 19% this quarter, up from 0% three months previously. Developing economies are also more optimistic: the BRIC average rose from 34% to 41%, the ASEAN average from 0% to 27% and the Latin America average from 61% to 73%.
“Signs of improvement in mature economies are clearly having a knock-on effect in emerging markets. Economies such as the BRICs, Mexico and Turkey are playing an increasingly important role in global growth prospects. But as they integrate further into the global economy, their businesses are becoming more reliant on the health of mature markets,” said Ed Nusbaum, CEO of Grant Thornton International Ltd.
“For me, the key takeaway from these results is that both emerging and mature markets seem to be pulling in the same direction, which can only bode well for the global recovery.”