The latest Global Economic Conditions Survey (GECS) from IMA® (Institute of Management Accountants) and ACCA (the Association of Chartered Certified Accountants) revealed some troubling news: Global economic confidence fell in the third quarter of 2018, its lowest since the beginning of 2016. The report predicted that global growth will slow gradually over the next several years largely due to weaknesses in the world’s two biggest economies, the U.S. and China. You can read the full report here.

Among the key survey findings:
  • While confidence fell by 20 points, it held up best in South Asia and Western Europe with falls of 2 and 6 points, respectively.
  • In both North America and Asia Pacific, confidence fell by over 20 points; in Asia Pacific, confidence was its lowest since the start of 2016, and in North America, it was the lowest since the start of 2017.
  • Confidence in the Middle East and Africa also fell sharply by 35 and 22 points, respectively.
  • Globally, 45% of businesses have considered a number of responses to a change in economic circumstances, such as cutting staff numbers or introducing a hiring freeze. • Only 18% of businesses are considering increasing staffing levels – a drop by 2% in the last quarter.
Meanwhile, the U.S. economy has performed strongly since the last presidential election and has been a key driver of global economic growth. Nonetheless, confidence in the U.S. is now at its lowest level since the first quarter of 2016, which corresponds to the latest hard activity data that show the country’s growth starting to ease following a very strong second quarter.

Raef Lawson, Ph.D., CMA, CSCA, CPA, IMA vice president of research and policy, said, “Ten years after the collapse of Lehman Brothers, which marked the start of the deepest global downturn since the great depression, the risk of something similar occurring in the near future appears low.

“There has been a sharp reduction in the amount of risky lending, including the sub-prime mortgages that triggered the crisis 10 years ago. The Dodd-Frank Act in the U.S. and the creation of the Prudential Regulation Authority in the UK, as well as the Basel III regulations that require banks to hold more capital, have made banking sectors across the developed world much safer. And while there are worries about property prices rising too quickly in some countries, these concerns are mostly focused on relatively small economies such as Hong Kong and Australia.”

The survey noted that the stimulating effect of recent tax cuts which have boosted corporate profits and investment will wear off over the course of the next few quarters. But interest rates are likely to remain relatively low over the coming years, and any further hikes will be contingent on the economy’s continued strong performance.

Meanwhile, although the trade war with China will cause some disruption for U.S. companies operating there, the macroeconomic impact is likely to be modest – as long as it does not escalate dramatically.

And although the U.S. employment index has plunged, it remains positive, reflecting the continued health of the U.S. jobs market. The country’s unemployment rate is at its lowest since 2000, and the economy continues to generate about 200,000 new jobs per month.

Fieldwork for the Q3 2018 GECS took place between and 2018, and attracted responses from 925 ACCA and IMA members around the world, including 89 CFOs.

For more information on the global economic conditions surveys, visit IMA's website.