Western Europe sees decline in economic confidence in Q3

Economic confidence in Western Europe has sharply fallen in Q3 and is almost 20 points below its recent peak in Q1 2023.

According to a recent survey from ACCA (the Association of Chartered Certified Accountants) and IMA (Institute of Management Accountants, which was conducted prior to the outbreak of war in Israel and Gaza on October 7, stated that the decline reflected the weakness in the Euro area and UK economies.

ACCA also stated that over the past quarter, the fall in confidence in the US was almost nine points down and 20 points down in North America.

In contrast, confidence in Africa has risen materially over the past year, and is now well above its long-term average.

Elsewhere Asia Pacific saw a modest improvement, perhaps reflecting tentative signs that policy easing is leading to some improvement in the Chinese economy.

The Middle East also reported a decline of over 10 points. Meanwhile, confidence in South Asia was quite mixed and didn’t show major changes in either direction. Confidence edged up higher but is down sharply over the past year. This is surprising given the general resilience in the Indian economy, although Pakistan has experienced significant difficulties.

However, the survey also revealed that while economic confidence did decline modestly it remains higher than a year earlier, and only slightly below its long-term average.

The indices for “New Orders,” “Employment,” and “Capital Expenditure” all experienced slight decreases, but only the last one is below average.

The GECS’s survey standard cross check on the economic outlook is the two ‘fear’ indices, which reflect respondents’ concerns that customers and/or suppliers may go out of business.
Concerns about customers going out of business ticked up slightly, but fears about suppliers declined to the lowest since 2019.

Jonathan Ashworth, chief economist at ACCA, said: “Overall the GECS survey remains consistent with some further loss in global economic momentum, although it does not suggest that a downturn is imminent. That said, the risks to global growth are heavily stacked to the downside. These risks include the lagged impact of past monetary tightening, soaring government bond yields, rising oil prices, the Chinese economy, and geopolitics. Accountants should advise their firms or clients to plan accordingly.

“One focus for accountants will be inflation. Concern about ‘increased costs’ edged back slightly again in the latest quarter. And although cost pressures seem to have peaked, they remain well above the average recorded over the survey’s history. This suggests that central banks could still have more tightening to do than markets currently expect. The sharp rise in oil prices over recent months will make their job even trickier.”