Every quarter, ACCA publishes its Global Economic Conditions (GECs) survey – the largest survey of professional accountants in the world. This business confidence monitor takes the pulse of the global economy, but for the forthcoming report the world's economic vital signs are fading fast.
The next full GECs report is due towards the end of September, but the statistics gathered ahead of its autumn publication are alarming.
GECs measures, among other things, accountants' confidence about the prospects of their own organisations. In late August, only one in eight (12.5 per cent) of respondents reported confidence gains, while more than half (54 per cent) reported a loss of confidence – a balance of -42.
This interim reading for the third quarter of 2011 marks a sharp fall from -8 in the previous quarter. Any reading lower than -14 indicates that the developed word is slipping into decline.
Asked how they felt about the state of the global economy, 49 per cent said things were 'getting worse', and 34 per cent felt that this was the bottom of the new downturn and that the economy would remain stagnant for a while yet. Only 17 per cent said that things were improving, or about to.
Customer demand is at the heart of this new downturn, with business incomes and new orders falling back to levels last seen in 2009 following months of disappointing data.
Combined with tightening finance, volatile foreign exchange rates and fewer profitable opportunities, this has put pressure on overall business investment. Although investment in capital projects might take a while to respond, employment and investment in staff have both fallen significantly in the last quarter.
While accountants' confidence ratings are a reliable indicator of the state of the global economy, the speed at which the situation is developing may be prompting strong emotional responses to what's gone on economically over the summer. We expect a much clearer picture to emerge once the data collection is complete in mid-September, but it is clear that the recent spate of economic bad news must have had an impact.
Summer is usually synonymous with the 'silly season', when news is thin on the ground. But this time round, it was an economic news onslaught; summer 2011 will be remembered for the fact that China offered advice to the USA about its domestic economic policy, about how to tackle its debt and how to live 'within its means'.
China's opportune advice was given when its own small and medium-sized businesses appeared to be struggling. At this time, the FT reported research from Alibaba.com, the e-commerce company, and Peking University that SMEs in China were facing problems with access to finance and rising labour costs. Rumours of SME bankruptcy were rife.
The summer also witnessed a phase of unprecedented financial and political disagreement between the Republicans and Democrats in Washington. After a nail-biting hiatus, the USA's House of Representatives finally passed a last-minute bill to raise the US borrowing limit. They did this while cutting spending by $2.1 trillion.
We saw Standard & Poor's downgrade the US's triple-A credit rating to a double-A; we saw stock markets plummet, then rise, then fall flat again; the Greek debt crisis continued and Italian politicians finally agreed austerity measures for the country; and finance ministers in Europe attended yet another debt crisis meeting to discuss the euro zone crisis, the 11th meeting in only 17 months.
The UK, of course, did not escape the summer of gloom either. With growth figures looking disappointingly low, with the government and opposition arguing about the pace of public spending cuts, the Bank of England unsure about interest rates, and insecurity about the state of the financial services sector wiping billions off the London Stock Exchange, Britain could not escape the trend of economic angst.
As we slip into September, the news has not improved. Carrefour, the world's second-largest retailer after Wal-Mart, issued a profit warning on the 31 August, and Peter Marks, the UK boss of the Co-op, told reporters earlier in the month that people were cutting back on food for the first time in his retailing career. His remarks were prompted by the organisation's profits falling 22 per cent in the first half of 2011.
With issues like these, it's tough times ahead for business. Hopefully this glut of challenging economic issues will be on the agenda for November's G20 meeting in France. By then ACCA will be coming into its next quarter set of stats for GECs; we hope the confidence index picks up by then, but the signs are not positive. It's definitely time to keep the economic defibrillators on charge.
Throughout recess, ePolitix.com will be focusing on a different policy theme each week. This week we are featuring articles with a focus on business and the economy.