World Economy Reaches 'Decisive Turning Point'

Confidence is soaring at British firms as parts of the global economy hit a "decisive turning point".

The Global Economics Conditions Survey (GECS) by the Association of Chartered Certified Accountants (ACCA) and Institute of Management Accountants (IMA), which questioned 2,000 financial professionals across the world, found that 43% of UK respondents were optimistic about the economic recovery during the second quarter, up sharply from 24% in the quarter before.

UK growth accelerated in the three months to June to 0.6%, up from the first quarter's 0.3% after a bounce in service sector output. The International Monetary Fund (IMF) also lifted its UK growth forecast for the first time in over a year, predicting 0.9% expansion in 2013 and a number of business confidence indicators ticked up.

ACCA/IMA's research joins other confidence indicators suggesting UK firms are enjoying an increasingly buoyant mood amid improving economic data.

BDRC Continental said 21% of the 500 British firms surveyed in its monthly Business Horizons study - which asks businesses to categorise themselves as forging ahead, progressing steadily, coping cautiously, or hard hit - reported that they were "forging ahead" in June, up from just 13% in May.

Deloitte's quarterly survey of chief financial officers (CFOs) found 45% of respondents think it is time to take more risk onto their company's balance sheets. The survey shows that risk appetite among CFOs is now at the highest level in six years, while 34% think cost cutting is a priority, down from 42% in the quarter before.

Global Picture

The ACCA/IMA survey also found that 47% of all respondents felt the state of the global economy was improving or about to do so, up from the previous quarter's 43%.

"This is not a recovery for everyone, but for significant parts of the world it looks like the real thing," said Emmanouil Schizas, senior economic analyst at ACCA and the editor of the GEC Survey.

"If this new found dynamism persists beyond a couple of quarters it could build its own momentum independent of monetary policy.

"For now, the second quarter of 2013 seems likely to prove a decisive turning point for the global economy – the beginning of a real recovery, for some of the global economy at least."

Not all regions of the world are optimistic about their future outlook.

"Only North America and Africa appear to be experiencing a genuine and indisputable economic recovery," said Schizas.

"Concerns about the state of the economic recovery and the health of the banking sector in China impacted on the wider Asia Pacific region.

"In the Middle East, Western Europe and the Caribbean, respondents felt more optimistic about the recovery than in the previous quarter, but less optimistic about the prospects of their own businesses.

"On the other hand, in South Asia and Central and Eastern Europe, there are signs of a renewed downturn."

The GECS reported falling expectations that the usual fiscal "big spenders", such as Russia, China and the US, will continue pumping stimulus into their economies through government spending. Those three countries account for around two-thirds of the world's entire GDP.

"While respondents there don't expect their governments to embrace austerity, even a small medium-term deceleration in government spending is likely to have a significant global impact," said Schizas.

Despite the general upturn in sentiment across the world, the IMF cut its global growth forecast by 0.2% to 2.1% for 2013, citing "weaker domestic demand and slower growth in several key emerging market economies, as well as a more protracted recession in the euro area."