Capital Confidence Barometer, October 2013
Economic outlook — confidence at two-year high
Executives are more optimistic about the global economy than at any point in the last two years.
Almost 90% of all executives are confident the economy is stable, and two-thirds believe it will improve at an accelerating rate. Informing this confidence is a global economy on sounder footing — improvement in economic conditions in mature economies and more stabilization in the major emerging markets.
The outlook for Europe has brightened in the last six months. Higher levels of employment, rising GDP and more access to capital provide evidence that the region’s economic downturn is subsiding.
In the United States, corporate earnings, employment growth and credit availability are also improving. This growing confidence will drive deal-making globally and across multiple industries as short-term market stability returns.
Q: What is your perspective on the state of the global economy today?
Economic confidence reaches two-year high
Confidence levels have risen dramatically over the last 12 months — a clear indication the economy is improving at an increasing rate. This confidence resonates from stable underlying economic fundamentals, particularly in mature markets: growing GDP, credit availability and increased job creation. Those who see the economy declining fell to 11%, the lowest level in two years.
Growth expectations continue to rise
Substantially all respondents anticipate economic growth, and those expecting growth in the 3%-5% range increased significantly. This correlates with companies’ increasing ability to invest and stakeholder demand for meaningful growth.
Developed economies will prompt global deal-making
Some of the world’s most mature and influential markets are increasingly confident in the strength of the global economy. They believe the economic fundamentals are sound, and the recurring ebbs and flows have largely been eliminated. Chinese respondents are the most confident, but mature markets such as the UK, US, Germany and Japan also have high confidence.
Commitment to job creation underscores plans for investment
Our respondents’ commitment to job creation is at its highest level in two years and highlights that companies need to hire as they prepare for the coming wave of growth. The sectors where most jobs will be created are oil and gas, automotive, and technology, which are also among the sectors most likely to pursue acquisitions.
Political instability outweighs economic concerns
While global political instability is believed to pose the greatest near-term risk, it is unlikely to derail the fundamental push for growth. Similar to the Eurozone or US crises, the recent unrest in Syria and Egypt pose challenges. ;However, these challenges should not be detrimental to the recovery of the global economy over the long term.
Ongoing market volatility tempers growth and investment mandates
Although confidence in leading economic indicators has improved significantly over the last 12 months, only 21% of respondents have confidence in short-term market stability — which is not yet aligned with their confidence in other leading economic indicators.
Consequently, companiesare carefully managing the rate at which they implement their growth and investment strategies. As such, the deal-making comeback will be measured.