By Daniel Hunter
The 13th Markit global survey of business expectations for the year ahead, covering 11,000 companies, indicated that firms have become more upbeat about their business prospects since the post-crisis low seen mid-year, resulting in higher expectations about employment and investment.
However, optimism remains well below the highs seen earlier in the recovery, indicating that global economic growth is likely to remain subdued in the coming year.
The number of companies expecting their business activity levels to rise in the next 12 months outnumbered those anticipating a decline by +33%, up from +30% in June but below the +39% reading seen in February.
Improving prospects for the developed world contrasted with still-low levels of confidence about the year ahead in the emerging markets.
Among the developed world, the upturn in confidence was led by the UK, where the outlook is the brightest seen since the survey began in early-2009. Optimism also improved in the eurozone, hitting its highest since mid-2011, notably improving in the ‘periphery’.
Confidence also picked up in the US, though rose only slightly from the post-crisis low seen in June to suggest that companies remain far less optimistic than this time last year.
In Japan, optimism remained weak, and slipped compared to mid-year, suggesting companies are unconvinced that the recent growth spurt is turning into a sustainable and robust upturn, in many cases harbouring concerns about growth prospects in other Asian countries, especially China. However, price pressures are set to improve, with input costs and output charges both rising at slightly faster rates.
Prospects among the four largest emerging markets remained unchanged on the post-crisis low seen in the mid-year survey. Both India and Russia saw optimism slide, while China’s outlook failed to improve on the low seen in the summer. Only Brazil saw business sentiment improve, reaching a new post-crisis high, buoyed by optimism about the positive impact of the soccer World Cup and Olympics.
“Worldwide business confidence has picked up from the post-crisis low seen at mid-year, but remains subdued, suggesting global economic growth will remain lacklustre as we move into 2014," Chris Williamson, Chief Economist, Markit said.
“The UK is the leading light among the developed world‟s largest economies, by a significant margin, suggesting the pace of UK economic growth will continue to outpace that of its western peers.
“The eurozone is also set to continue its modest recovery, with particularly welcome upturns in sentiment in the region‟s periphery accompanying an improved outlook in the core.
“The euro area is nevertheless set to act as a dampener on global growth in 2014, expanding at a sub-trend pace, as will the emerging markets. Only Brazil showed improved optimism, and even there the survey suggests the upturn could prove short-lived. Confidence is meanwhile running at post-crisis lows in China, India and Russia, highlighting a risk of even weaker emerging world economic growth in 2014.
“An upturn in US business optimism is welcome news, but the outlook is only slightly brighter than the post- crisis low seen at mid-year. Companies continue to fret about further disruption from unresolved fiscal issues, and are still particularly cautious about committing to hiring in this uncertain environment.
“The sustained robustness of Japan‟s recovery also has a question mark hanging over it, as businesses became less optimistic about the outlook. The data highlight the need for Japan‟s government to make faster progress with its 'third-arrow' of structural reform.”
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