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Outlook for the Global Economy Declines in Latest CGMA Forecast

CGMA accounting management businessOn July 10, the AICPA and CIMA released the results of the most recent CGMA Global Economic Forecast, which showed the world’s CEOs, CFOs and senior management accountants hold an increasingly pessimistic outlook for the global economy over the next 12 months. The shift to a more negative sentiment appears to reflect the worsening of the sovereign and financial crisis in Europe and its effects on other regions, as well as slower growth in China and political and fiscal uncertainty in the U.S.

The CGMA Global Economic Index – a comprehensive gauge of executive sentiment within the Forecast – declined 7 points to 58 from the first quarter 2012 reading of 65. The Index is a composite of 10 equally weighted survey measures on a scale from 0 to 100, with 50 considered neutral and numbers above that signifying positive sentiment.

“Although the CGMA Global Economic Index is still slightly above neutral, the pullback in optimism points to an unclear future in which companies must be prepared to address a variety of economic scenarios,” said Arleen Thomas, CPA, CGMA, AICPA senior vice president for management accounting.

While all factors in the Index weakened, the global economic optimism component registered the most significant decline. Only 11 percent of respondents expressed optimism. 

“Businesses continue to show a need for the strategic perspectives of management accountants who can navigate the uncertain elements of our global economy,” said Thomas.

In the U.S., 36 percent of management accountants surveyed are optimistic about the domestic economy, down from 44 percent in the prior quarter. Asked about their own organizations, 51 percent of U.S. respondents are optimistic about prospects for their companies, a decrease of 7 percentage points over last quarter. 

Other survey findings include:

  • Weak Employment Outlook: Companies globally expect to increase headcount by only 0.6 percent, weaker growth than the 1.6 percent increase predicted just three months ago. With the exception of the retail and wholesale trade, the reduced projections for headcount growth were spread across all industry sectors.  In the U.S., projections declined from 2.4 percent to 1.3 percent. While hiring growth remains weak, 34 percent of management accountants in the U.S. said their businesses are operating with too few employees.  
  • Industry Sector Outlook: 53 percent of finance and insurance respondents are now optimistic about their own companies, followed closely by those in retail and wholesale trade, 50 percent. All other sectors reported less than 50 percent optimism, including banking, 48 percent, manufacturing, 45 percent and technology, 41 percent.  

"Our survey shows there is still a risk of a knee jerk reaction by organizations, with economic pessimism leading to an investment freeze on areas that are the bedrocks of future success such as training, recruitment, R&D and capital investment,” said David Rowsby, Regional Director-Europe, CIMA.

The quarterly forecast polled 600 management accountants from more than 60 countries on global and domestic economic conditions, as well as the outlook for their organizations.

The CGMA Global Economic Forecast captures the views of CGMA Management Accounting professional decision makers from around the world on global economic conditions and current topical issues. As it is based on the views of senior business executives from around the world, it provides a bellwether of the health of the corporate sector and of the wider global economy. It also highlights the broad business perspective of management accounting executives and the value that they bring to their organizations in terms of the key performance indicators that matter to businesses, shareholders and other stakeholders.

Full results are available at cgma.org.



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