Fears about inflation and a slump in business are dampening the economic confidence of accountants in the U.S. and other parts of the world, according to a new survey.
The quarterly
The survey found that nearly three-quarters of businesses are contending with growing costs, with the highest proportion of respondents reporting increased cost pressures for the last decade and more than one in three were concerned about decreased income, with a similar percentage pointing to foreign exchange volatility as uncertainty and a possible recession dominating the latest economic outlook.
More survey respondents reported "problems securing prompt payment," rising to the highest level in four years, signaling an increase in the number of organizations that may be experiencing cash-flow difficulties. The survey also indicated an increase in organizations reporting "problems accessing finance," with the most aggressive tightening of monetary policy in 40 years likely to hit corporate liquidity.
While the overall economic outlook rose a bit from the second quarter, three specific indicators of economic activity — new orders, capital expenditure and employment — all showed further deterioration.
"Although confidence recovered from the very sharp fall in the Q2 survey, the indices for new orders, capital spending and employment all showed further deterioration," said Loreal Jiles, vice president of research and thought leadership at the IMA, in a statement. "The two 'fear' indices — reflecting the level of concern that customers and suppliers may go out of business — were little changed but remain above pre-pandemic levels."
The survey found a growing disparity in confidence levels across different regions of the world, with low levels in North America and Western Europe contrasting with the more upbeat perspective among the survey's Middle Eastern and South Asian respondents. After collapsing to a record low in Q2, North American confidence recovered slightly in Q3, but it's still the second weakest reading in the survey's history. Even more concerning is that new orders, capital spending and employment all deteriorated in Q3. The increase in interest rates by the Federal Reserve is expected to slow the U.S. economy next year in an effort to bring down inflation.
"These series are less volatile than the confidence measure and may give a better sense of the slowdown in economic growth that is underway in the region," said Jamie Lyon, head of skills, sectors and technology at ACCA, in a statement. "With the U.S. Federal Reserve engaged in an aggressive monetary tightening to bring inflation back under control, it is inevitable that both confidence and economic activity will be reduced."
The deterioration in Europe probably reflects the impact of the war between Russia and Ukraine, and the upward pressure on energy prices. Over the past 12 months, the Western Europe Confidence Index has fallen by 80 points, and confidence is down this year across all regions.
The survey, conducted in September, received 905 responses from ACCA and IMA members.
