Accountants feeling more cautious in Q3
- Key insight: Uncover how global accountant confidence shifted in Q3 while North American sentiment diverged.
- What’s at stake: Firms and consumers if persistent energy and operating costs trigger further central bank tightening.
- Expert quote: “There is something of a tug of war going on…” — Alain Mulder, IMA
Confidence among accountants globally declined slightly in Q3, but rose in North America, especially in the U.S., according to a new survey.
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Confidence increased in North America, however, mainly driven by a rise in the U.S. despite the impact of inflation and high gas prices. There was also some improvement in Western Europe, with gains in both the U.K. and the wider region. In contrast, the survey found a large decline in confidence in Asia Pacific after a huge increase in Q2.
Among the various components of the survey, the Global New Orders Index has improved and is a little above its historical average and broadly similar to other readings in the aftermath of Russia’s invasion of Ukraine. There were also small gains in the Global Capital Expenditure and Employment indices, although both remain below series averages. The AI boom continues to provide significant support to global growth and stock markets.
“There is something of a tug of war going on in the global economy at the present time, with the AI boom a major driver of growth and equity markets, while higher energy prices, inflation and government bond yields are pulling in the other direction,” said Alain Mulder, region head for Europe and Central Asia and senior director of global B2B at the IMA, in a statement. “Further significant gains in energy prices and government borrowing costs would be increasingly challenging for global growth.”
The downside risks are growing, however, amid the renewed rise in energy prices and inflation in recent months, large increases in government bond yields, and tighter monetary policy. Cost pressures remain a major challenge for firms. Nearly 70% of surveyed accountants globally reported increased operating costs in Q3. That’s down from Q2, but significantly above the series average. Some 82% of CFOs experienced higher costs, barely lower than in Q2. Meanwhile, nearly 50% of respondents anticipate interest rates to rise in their country over the next three months, up from 42% in Q2.
Economic pressures remain accountants’ top risk priority globally in Q3 (24%), followed by geopolitical instability (18%), and then regulatory/compliance risks and cybersecurity (c.13%).
Confidence rose in North America in Q3, driven by a marked rise among U.S. based accountants. There was also a sharp rise in the U.S. Capital Expenditure Index and a decent increase in the Employment Index, although there was a very small fall in the New Orders Index. Overall, the indices point to some strengthening in the U.S. economy in Q3, although the key indicators remain below their historical averages by varying degrees, particularly the Employment Index, likely reflecting the sluggish jobs market.
Survey respondents cited various headwinds still facing U.S. firms, including import tariffs, high energy prices and inflation, geopolitical and policy uncertainty, and elevated interest rates. Among U.S.-based respondents, 77% reported increased operating costs in Q3, down slightly from Q2, but very high by historical standards. As a sign of the headwinds and elevated uncertainty, 45% of U.S. survey respondents ranked economic pressures as their top risk priority, far ahead of the other risks.
“While the global economy has shown remarkable resilience this year, downside risks remain prevalent,” said ACCA chief economist Jonathan Ashworth in a statement. “The longer energy and other prices remain elevated, the greater the pressure on firms to pass on their cost increases, which would weigh on consumers and increase the likelihood of further monetary tightening by the Fed and other central banks. Despite various headwinds, U.S. economic growth is benefitting significantly from the AI boom. Anything that fueled a meaningful slowing in that over coming quarters, would clearly be problematic.”
