The latest economic conditions survey from ACCA and IMA of accountants and CFOs across the globe suggests that the sharp rebound in global confidence in the aftermath of Russia’s invasion of Ukraine has ended.

Ongoing aggressive interest rate hikes by central banks, and China’s weaker than expected economic recovery, have likely weighed on confidence, offsetting any benefit from receding fears of a global banking crisis and falling inflation.

There is no evidence that a global recession is on the cards though. Sentiment at the global level remains around its long-term average, as do the key new orders, capital expenditure, and employment indices.

There were some notable regional trends. Confidence fell sharply in Asia-Pacific and the export-sensitive Western Europe. But confidence in North America actually rose for the fourth consecutive quarter, with gains in the new orders, capital expenditure, and employment indices. This would suggest that the U.S. economy may continue to defy predictions of a recession.

It is somewhat surprising that the aggressive monetary tightening has not had a material impact on the GECS “Fear’’ indices which reflect respondents’ concerns that customers and/or suppliers may go out of business. Both these indices continue to improve (see chart below), which suggests little concern about the impact of higher interest rates, recession risks, or the growing number of bankruptcies.

Of course, it may just be a case of calm before the storm, as the lagged effect of tighter monetary policy works its way through the global economy and financial system. Indeed, the indices measuring global problems accessing finance and securing prompt payment both deteriorated in 2Q, although neither looks particularly worrying yet by historical standards. Meanwhile, the percentage of global respondents concerned about increased costs declined slightly again, although it remains very elevated by historical standards, suggesting that central banks may have more work to do.

Jonathan Ashworth, Chief Economist at ACCA, said:

“The survey aligned with my sense of how things are developing in the global economy, with some loss in momentum through 2Q. Things don’t look particularly alarming though, and a global recession does not look imminent. By region, things aren’t looking that great in Asia-Pacific and Western Europe. Chinese policymakers may need to increase policy stimulus, while the ECB and BoE might want to tread carefully with monetary tightening. In contrast, the U.S. economy is looking pretty resilient, suggesting the Fed may be able to carry off the much talked about soft landing”.

Dr. Susie Duong, Director of Research at IMA, said:

“Looking at the change in the GECS Confidence Indices over the year, one notable factor is the resilience of North America. With a stronger than expected growth of the U.S. economy in 2023 Q2, it suggests that an imminent recession for the U.S. does not seem likely this year, although Asia and Europe could increasingly become a drag if growth decelerates significantly there. The robustness of the global ‘fear’ indices is also unexpected. However, it’s less clear that will still be the case at the turn of the year.”

Read the full GECS report