Tags: Markit Survey | global | business sentiment | optimism

Markit Survey: Global Business Sentiment Falls to Five-Year Low

By    |   Monday, 24 November 2014 01:26 PM

Corporations around the world are growing gloomier in their business outlook, according to a Markit survey.

Its poll of 6,100 companies shows their optimism dropped in October to the lowest level since the survey began five years ago. Businesses are particularly pessimistic when it comes to hiring and investment plans.

The percentage of companies that expect their activity to expand in the next year topped the percentage who expect activity to shrink by 28 points. But that represents a sharp slide from 39 points in the summer.

“Key threats include fears of a worsening global economic climate, and notably a renewed downturn in the eurozone, the prospect of higher interest rates in countries such as the U.K. and U.S. next year, geopolitical risk emanating from crises in Ukraine and the Middle East, plus growing political uncertainty in many countries,” the report said.

"U.K. firms were the most upbeat about employment plans among major economies, while French firms were the most downbeat, France being the only country where a net drop in employment is indicated for the year ahead," Markit said in the report.

Optimism in the manufacturing sector slid to its lowest level since mid-2013, while optimism in the service sector slipped to a record five-year low.

In the United States, optimism touched a record low, with the service sector leading the decline.

But U.S. optimism remained stronger than in the eurozone, where it fell to a 16-month low, and in Japan, where it fell to a two-year low.

"Clouds are gathering over the global economic outlook, presenting the darkest picture seen since the global financial crisis [of 2008-09]," Chris Williamson, Markit's chief economist, said in a statement.

"Companies’ hiring and investment intentions have both fallen to post-crisis lows alongside the bleakest outlook for future business activity seen over the past five years," he said.

“Inflationary pressures are expected to ease further, meaning central banks will have leeway to keep policy looser for longer to help support economic growth, especially as the risk of deflation remains a major worry," he said.

"Of greatest concern is the slide in business optimism and expansion plans in the U.S. to the weakest seen over the past five years. U.S. growth therefore looks likely to have peaked over the summer months, with a slowing trend signaled for coming months," Williamson said.

Meanwhile, "there's also little sign of the eurozone's malaise ending any time soon, as companies have become even less optimistic about the outlook," he said.

"Optimism in Japan continued to lag behind that of the U.S., U.K. and even the euro zone, dropping to a two-year low to suggest companies have become increasingly disillusioned with the potential for 'Abenomics' to boost growth," Williamson said.

Another problem on the global economic front is currency wars.

"Central bankers struggling against weak growth and falling inflation have come up with a cunning plan: shift the problems on to someone else," writes Alen Mattich of The Wall Street Journal.

"Finding it hard to stimulate domestic demand through cheap credit in a world of rock bottom interest rates, the next best solution central bankers have settled on is to generate growth by boosting net exports. And the way to do that is to devalue their currencies."

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Corporations around the world are growing gloomier in their business outlook, according to a Markit survey.
Markit Survey, global, business sentiment, optimism
Monday, 24 November 2014 01:26 PM
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