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World — Confidence in global growth prospects remains largely intact in Summer 2010

02 August 2010

The latest KPMG Global Business Outlook Survey shows that optimism at companies around the world has held steady since the last survey in February.

Both manufacturers and service providers remain confident of rising activity during the next twelve months, supporting growth of revenues and profits.


Positive sentiment regarding employment has increased, but inflation expectations have also risen modestly.

In the European Union (EU), diverging trends are apparent between the services and manufacturing sectors. Confidence in the former has slipped to the lowest since April 2009. A number of companies expressed concerns in the latest survey period that the Eurozone sovereign debt crisis, coupled with fiscal austerity in many countries, will subdue activity going forward.

Sentiment has weakened in all EU countries for which services data are available with the exception of Ireland, which posts the highest optimism. Companies in France and Italy remain notably more upbeat than those in Germany and the UK, where service providers are the least confident since April 2009.

EU manufacturers are slightly more upbeat than was the case in February, with June's net balance the highest since July 2007. In those countries using the European single currency, panellists frequently cited a favourable euro/US dollar exchange rate as a factor likely to boost activity. This has contributed to increased confidence amongst manufacturers in Germany, France, the Netherlands and Ireland. Currency effects continue to support optimism in the UK manufacturing sector, which again registers the strongest degree of positive sentiment in the EU.

In contrast, Greece continues to lag well behind despite the recent EU-IMF rescue loan for its government, with manufacturers signalling pessimism for the fifth consecutive outlook period and to the most severe degree in the survey history. In Spain, fears over sovereign debt and financial sector stress are likely to have contributed to June's lower confidence balances for manufacturing and services activity compared with February. In both cases, these are the second-lowest of all countries surveyed, albeit still well inside positive territory.

Companies in the EU maintain cautious attitudes towards their labour forces. In Greece and Spain, declines in employment are expected.

To read the full Global Business Outlook Survey please click here

 

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