Global Business Outlook Drops to 5-Year Low

The worldwide economy may not have returned to a recession. However, business executives around the world have started to exhibit so much anxiety that another dip may be just around the corner. The Markit Global Business Outlook dropped to a five-year low.

Five years ago, in 2009, much of the world remained in recession, which makes the Markit data even more worrisome. The forecast released by Markit researchers showed:

The Markit Global Business Outlook Survey, which looks at expectations for the year ahead across 6,100 companies, showed optimism falling sharply in October, dropping to the lowest seen since the survey began five years ago. Hiring and investment plans were also at or near post-crisis lows, price expectations deteriorated further.

While America currently carries the world economy on its back, mostly due to consumer activity, businesses do not share that sentiment:

However, the most striking development was the extent of the down turn in the US, where optimism hit a new survey low, with the service sector seeing a particularly dramatic decline.

If American sentiment has fallen so sharply, U.S. fourth-quarter gross domestic product, which many economists forecast at 3% or 4%, will disappoint.

Areas where recession continues to hold economies in check were, as might be expected, pockets of pessimism:

Optimism in the US nevertheless remained more buoyant than seen in the Eurozone and Japan, the latter suffering from especially weak confidence relative to other major countries as optimism slipped to the lowest for two years.

No wonder central banks in both regions have begun more aggressive efforts to salvage their economies.

Also, the Chinese central bank has begun equally aggressive efforts at stimulation, and to hold off what could be the start of deflation. Markit data tell why:

Confidence in China picked up slightly from the near-record lows seen in the summer, though remained subdued compared to prior years.

Long term, experts share the opinion that central banks have only modest (or less) effects on economic downturn. If so, the Markit data warn that the balance of this year and next could be the start of a dip that looks like the early stages of a recession.

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