22% view the global economy as improving compared with 52% in April.
Global economic outlook has weakened
As the slowdown persists in developed and emerging economies, companies are less optimistic about the future than they were six months ago. Only 22% of respondents believe the global economic situation is improving, down from 52% in April. There has also been an increase in the number of companies who report declining sentiment, from 20% to 31%.
What is your perspective on the state of the global economy today?
| 22% |  | view the global economy as improving compared with 52% in April. |
More than half expect the global economic downturn to persist for another one to two years, while 15% predict it will last more than two years. With slow growth expected to continue, many companies are focusing on bottom-line improvements and low-risk organic growth opportunities. Few see the urgency for conducting major M&A transactions in such an uncertain climate.
How long does your organization expect the global economic downturn to persist?
| 66% | | believe the economic downturn is likely to persist for at least another year. |
Viewpoint A new sense of commitment by policymakers Slowing economic growth around the world is a key issue for central banks and policymakers. Many had hoped that a return to growth in developed markets, along with strong momentum in emerging economies, would have sparked a global recovery and reduced the need for more drastic policy action.
Recent months have seen policymakers reach even deeper into the toolkit. September saw bold action on a number of fronts. On 6 September, the European Central Bank (ECB) announced ambitious plans to buy theoretically unlimited quantities of bonds from struggling Eurozone countries.
Six days later — after our survey closed — the German Constitutional Court backed the European Stability Mechanism, which commits the ECB to being a lender of last resort, with €700 billion of capital at its disposal. The following day, the US Federal Reserve announced it would buy US$40 billion of mortgage-backed securities every month to spur the real estate markets and hold up asset prices.
This is an important moment in the global economic cycle. The policy actions taken in the Eurozone together with the promise of fiscal union could represent a turning point in the crisis, potentially decreasing volatility. And, by embarking on QE3, the Federal Reserve has also signaled its intention to take bold action. However, there remain deep-seated structural problems that will be difficult to overcome.
These measures may only prove to have short-lived benefits, but they do demonstrate a renewed sense of urgency among policymakers to tackle the economic downturn once and for all. |
Local economic sentiment weakens
In line with the global results, local economic sentiment has also declined.
Ten countries with the highest percentage of respondents holding negative views on their local economies
By and large, the countries with the most negative sentiment are those most affected by the Eurozone crisis and slowing growth in China.
Confidence in earnings drops
There has been a marked decline in expectations for corporate earnings, with only 30% of respondents positive about the outlook in October 2012, compared with 44% in April. The decline in corporate earnings expectations is consistent across all geographies.
| 30% | | are positive about earnings, compared with 44% in April. |
Viewpoint The Eurozone crisis continues to dominate
A regional difficulty has become a global problem — almost 90% of respondents cite the Eurozone crisis as affecting their business.
Six months ago, the Eurozone was recognized in boardrooms as an impact, with contingency plans around currencies and which countries might exit the euro. More recently, however, the Eurozone has been recognized by companies around the world as a long-term structural issue to be considered in long-range business planning.
While the ECB continues to take action to calm the crisis, the region’s economic problems are far from resolved. As long as economic stagnation persists, the Eurozone will continue to be a drag on the broader global economy, affecting its trading and export partners, potentially for years to come.
Leading companies are taking proactive measures, such as reducing costs to relieve pressure on margins, and better managing counterparty default risk and supply-chain risk. |
| 89% | | believe the Eurozone crisis has affected their business. |
What are the most significant challenges facing your business in light of the Eurozone crisis? (Select two)
Fewer expect to create jobs
In light of economic challenges, the percentage of respondents planning to create jobs has decreased from 41% in April to 28% in October. The percentage of those who plan to maintain their workforce has increased significantly from 47% to 59%.
This may reflect a wait-and-see attitude among companies that are simultaneously unwilling to take risks but reluctant to lose flexibility should better times return.
With regard to employment, which of the following does your organization expect to do in the next 12 months?
| 28% | | are seeking to increase their workforce in light of economic challenges, a significant shift from 41% in April. |
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