Survey of 600 CEOs, CFOs and other Management Accountants Reveals Key Insights About the Global Economy
NEW YORK and LONDON (March 29, 2012) – The world’s CEOs, CFOs and other senior management accountants have a cautious, yet increasingly positive outlook for the global economy over the next 12 months, according to the first CGMA Global Economic Forecast released today by the American Institute of CPAs (AICPA) and Chartered Institute of Management Accountants (CIMA).The quarterly forecast polled 600 management accountants from more than 60 countries on global and domestic economic conditions and the outlook for their organisations.
The CGMA Global Economic Index – a comprehensive gauge of executive sentiment within the Forecast – rose 7 points to 65 from a baseline reading of 58 established during a fourth quarter 2011 survey. 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.
While all factors in the Index rose, the global economic optimism component registered the most significant gain, rising 15 points from the fourth quarter. However, the current reading of 37 reflects continued concern about the global economy. Only 18 percent of respondents expressed optimism, ranging from 22 percent in the U.S. to just 12 percent in Asia. Still, that’s up from last quarter when 9 percent of all respondents said they were optimistic about the global economy.
“Management accountants are in a unique position to assess the future of the global economy as they drive the strategic and financial decisions of their companies,” said Arleen Thomas, AICPA senior vice president for management accounting. “In aggregate, the CGMA Global Economic Index rose seven points from last quarter, indicating an important and positive economic trend. In the U.S. the story is even stronger, with organisations feeling increasingly confident about the overall domestic economy, as well as prospects for their own businesses.”
In the U.S., 44 percent of management accountants surveyed are optimistic about the domestic economy, compared to 23 percent in the prior quarter. Asked about their own organisations, 58 percent of U.S. respondents are optimistic about prospects for their companies, an increase of 8 percentage points over last quarter.
The Forecast also found that 17 percent of UK respondents and 23 percent of European respondents are optimistic about the domestic economy. This compares to 10 percent in the UK and 18 percent in Europe in the previous quarter. In addition, 54 percent of UK respondents and 51 percent of European respondents are optimistic about prospects for their companies, an increase of 16 percentage points in the UK and 14 percent points in Europe over last quarter.
"Management accountants work where finance and business strategy meet and so are perfectly placed to assess the future from both a micro and macro level,” said Charles Tilley, CIMA’s chief executive.“Whilst it's great to see that overall, confidence is up on the last quarter, when you look at the underlying factors there is a marked difference between how they feel about their own organisation's ability to succeed in continuing challenging times and their confidence in the domestic and global economy to emerge from the gloom. However, many are predicting some growth in revenue, profits and spending which is encouraging."
Other key survey findings include:
• Revenue and Profits: The global expected revenue increase for the coming 12 months is now 4.1 percent, up from 3.1 percent last quarter. In the U.S. this number is 4.8 percent, up from 3.4 percent last quarter. The global expected increase in profits also improved, moving from 2.4 percent in the fourth quarter of 2011 to 3.5 percent this quarter. In the U.S. this number is 3.8 percent, up from 3 percent last quarter.
• Hiring: Globally, 42 percent of respondents said their organisation plans to increase their number of employees in the coming year, an increase of 4 percentage points from last quarter.
o In Asia, 53 percent of respondents said their organisation plans to increase their number of employees in the coming year. This compares to 49 percent last quarter.
o In the U.S., 43 percent of respondents said their organisation plans to increase their number of employees in the coming year. This compares to 45 percent last quarter.
o In the UK, 40 percent of respondents said their organisation plans to increase their number of employees in the coming year. This compares to 33 percent last quarter.
o In Europe, 33 percent of respondents said their organisation plans to increase their number of employees in the coming year. This compares to 23 percent last quarter.
• Expansion: Two-thirds (66 percent) of global respondents expect their business to expand at least somewhat in the coming 12 months. In the U.S. this number is 68 percent.
• Top Challenges: Domestic economic conditions, global economic conditions, and domestic competition topped the list of challenges for respondents’ organisations on an overall basis this quarter.
o In the U.S., the top three challenges are domestic economic conditions, regulatory requirements / changes and domestic political leadership.
o In the U.K., the top three challenges are domestic economic conditions, global economic conditions and domestic competition.
o In Europe the top three challenges are global economic conditions, stagnant / declining markets and developing new products / services / markets.
o In Asia the top two challenges are global economic conditions and inflation. Employee / benefits costs and the availability of skilled personnel tied for third.
• Industry Outlook: From an industry sector perspective, 63 percent of manufacturing respondents are now optimistic about their own companies, followed closely by those in finance and insurance (62 percent). Significantly more than half of respondents in the retail and wholesale trade (59 percent) and technology sectors (55 percent) are also optimistic. Exactly half (50 percent) of respondents from banking, and slightly more than a third (37 percent) of construction industry respondents are now expressing optimism.
• Impact of Eurozone Woes: When asked about the likelihood of a “Grexit” Greece exit from the Euro in the next 12-18 months – survey responses revealed an average expected likelihood of 52%, with UK respondents giving a slightly higher figure at 59%. The survey results indicate an average expected likelihood of a break-up of the Euro in the next 12-18 months to be much less likely, at 25%. When asked about the impact of a break-up of the Eurozone, 47% respondents working in European companies indicated a break-up would have a significant impact on their business, with a further 48% indicating it would have a moderate impact. Less than 20% of respondents across the other global regions projected a significant impact on their business.
The CGMA Global Economic Forecast quarterly survey was completed by CGMA panelists between February 22 and March 13, 2012. Panelists comprise CGMA Management Accounting Professional Decision makers (primarily CFOs, CEOs and Controllers) who work in business and industry. In total, the opinions of 618 CGMA Management Accounting Professional Decision makers from around the world were captured in 1Q 2012. Panelists were identified and initial data collected in a November 2011 survey. Those findings were intended to establish a baseline for the 1st quarter survey and were not released.
The 10 factors included in the CGMA Global Economic Index are as follows:
1. Global Economy Optimism – Respondent optimism about the global economy
2. Domestic Economy Optimism - Respondent optimism about their own national economy
3. Organisation Optimism - Respondent optimism about prospects for their own organization
4. Expansion Plans - Respondent expectations of whether their business will expand over the next 12 months
5. Revenue - Expectations for increases or decreases in revenue over the next 12 months
6. Profits - Expectations for increases or decreases in profits over the next 12 months
7. Employment - Expectations for increases or decreases in headcount over the next 12 months
8. IT Spending - Plans for IT spending over the next 12 months
9. Other Capital Spending - Plans for capital spending over the next 12 months
10. Training & Development - Plans for spending on employee training and development over the next 12 months
Chartered Global Management Accountant (CGMA)
Two of the world’s most prestigious accounting bodies, AICPA and CIMA, have formed a joint-venture to establish the Chartered Global Management Accountant (CGMA) designation to elevate the profession of management accounting. The designation recognizes the most talented and committed management accountants with the discipline and skill to drive strong business performance.
Chartered Institute of Management Accountants (CIMA)
The Chartered Institute of Management Accountants, founded in 1919, is the world’s leading and largest professional body of Management Accountants, with more than 195,000 members and students operating in 176 countries, working at the heart of business. CIMA members and students work in industry, commerce, the public sector and not-for-profit organizations.
American Institute of CPAs (AICPA)
The American Institute of Certified Public Accountants (AICPA) is the world’s largest association representing the accounting profession, with nearly 377,000 members in 128 countries and a 125 year heritage. AICPA members represent many areas of practice, including business and industry, public practice, government, education and consulting.