While the United States ranked as the sixth most optimistic economy in fourth quarter 2014, a recent spate of global uncertainty is weighing on growth prospects for the year ahead. This is according to the latest data from the Grant Thornton International Business Report (IBR), a survey of more than 2,500 business leaders in 34 countries.
Optimism for the nation’s economic outlook among U.S. business leaders remained rather strong at a net balance of 59 percent in fourth quarter 2014, but declined from net 69 percent in the previous quarter. The decrease in optimism in the United States still reflects a 23 percentage-point increase from one year ago. In fourth quarter 2014, global optimism dropped from net 43 percent to 35 percent. The five counties with higher economic optimism than the U.S. are India, Ireland, New Zealand, Australia and the United Kingdom.
The notion that U.S. business optimism remains relatively stable correlates with other recent research from the Grant Thornton LLP 2014 Fall CFO Survey, which indicated that nearly half of CFOs (47 percent) expect the U.S. economy to improve during the next six months and only 9 percent expect it to worsen. The biannual survey reflects the insights of more than 1,000 CFOs and other senior financial executives across the United States.
“Business confidence in 2014 climbed to levels not seen since before the financial crisis, and executives remained largely positive about their expansion prospects,” said Stephen Chipman, senior vice chair at Grant Thornton LLP. “However, the prevailing uncertainty is forcing businesses to delay decisions about investment in the future growth of their operations. The dip in optimism in the past three months suggests that businesses around the globe could see volatility on the horizon in the new year.”
The increasing global uncertainty is weighing heavily on business growth prospects. Globally, revenue expectations fell from net 56 percent to 43 percent, and profitability expectations declined 11 percentage points to net 32 percent. In China (net 37 percent) and the United States (net 35 percent), revenue expectations dropped 33 percentage points from the previous quarter. Profitability expectations in China, which decreased 33 percentage points to net 13 percent, and in the United States, which fell 23 percentage points to net 34 percent, have seen similar falls.
Encouragingly, IBR data reveals U.S. companies’ plans to invest in research and development have continuously increased during the past two years to net 37 percent, up 10 percentage points from the previous quarter. This also reflects a 26 percentage-point increase from fourth quarter 2012.
Companies’ plans to invest in new buildings in the next 12 months increased to net 39 percent, up 14 percentage points from last quarter, while plans to invest in plants and machinery increased 5 percentage points to net 37 percent. In fourth quarter 2014, nearly half (net 43 percent) of manufacturing leaders expect their industry’s revenue to climb in the next year. A net balance of 23 percent of manufacturing leaders predict an increase in hiring in the coming year, while 62 percent expect to offer employees a pay raise in the next 12 months.
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Tags: Accounting
