U.S. business leaders’ optimism remains strong, German outlook plummets

Woes of eurozone’s largest economy threaten U.S. growth, overshadow confidence in global economic recovery

CHICAGO--()--While optimism for the nation’s economic outlook among U.S. business leaders remained strong at a net balance of 69 percent in third quarter 2014, German optimism plummeted 43 percentage points to just net 36 percent. This is according to the latest data from the Grant Thornton International Business Report (IBR), a survey of more than 2,500 business leaders in 34 countries.

U.S. business leaders’ optimism declined just 5 percentage points from second quarter 2014, which marked the highest level since 2004. This also reflects a 17 percentage-point increase from the same three-month period one year ago. However, the sharp decline in German business confidence follows a contraction in the German economy in second quarter 2014, amid fears of the impact of the Ukraine crisis on trade and the energy supply. The proportion of German firms citing a lack of demand as a constraint on growth has jumped from just 6 percent to nearly one in four. Expectations for employment in the country have also dropped into negative territory (net -8 percent) for the first time since 2010 — the lowest of all 34 economies surveyed.

“We knew that the economic environment in Germany had worsened in recent months, but the severity of the change in outlook by our nation’s largest trade partner within the EU and one of the largest sources of foreign direct investment in the United States has very significant implications for the U.S. economy and businesses,” said Stephen Chipman, chief executive officer of Grant Thornton LLP. “While optimism among U.S. business leaders remains relatively high — boosted primarily by recent strong employment and economic growth — we will be watching closely in the coming months to gauge the domestic repercussions of the weakening eurozone.”

Encouragingly, IBR data reveals an improvement in sentiment about most areas of U.S. business performance and stability, perhaps providing a bit of solace in the interim. During the past three months, hiring expectations in the United States rose 13 percentage points to a net balance of 47 percent of business leaders foreseeing an increase in hiring in the coming year. Revenue expectations among U.S. business leaders rose to a net balance of 68 percent, up 10 percentage points from the previous quarter and an 18 percentage-point increase from one year ago. This marks the highest level for both hiring and revenue expectations since 2007. In addition, companies’ plans to invest in research and development has continuously increased during the past two years to net 27 percent, up 16 percentage points from third quarter 2012. Following a 19 percentage-point decrease in second quarter 2014, plans to invest in plants and machinery increased 8 percentage points to net 32 percent.

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Notes to editors

The Grant Thornton International Business Report (IBR) provides insight into the views and expectations of more than 10,000 businesses per year across 34 economies. This unique survey draws upon 22 years of trend data for most European participants and 11 years for many non-European economies. For more information, please visit: www.internationalbusinessreport.com.

Data collection

Data collection is managed by Grant Thornton International Ltd's core research partner – Experian. Questionnaires are translated into local languages with each participating country having the option to ask a small number of country specific questions in addition to the core questionnaire. Fieldwork is undertaken on a quarterly basis. The research is carried out primarily by telephone. For percentages not identified as a percentage of respondents, the net percent balance is reported as the proportion of companies reporting they are optimistic/the trend has increased less those reporting they are pessimistic/trend has decreased.

Sample

IBR is a survey of both listed and privately held businesses. The data for this release are drawn from interviews with 2,500 businesses from all industry sectors across the globe conducted during August and September 2014. The target respondents are chief executive officers, managing directors, chairmen or other senior executives.

About Grant Thornton

Grant Thornton is one of the world's leading organisations of independent assurance, tax and advisory firms. These firms help dynamic organisations unlock their potential for growth by providing meaningful, forward looking advice. Proactive teams, led by approachable partners in these firms, use insights, experience and instinct to understand complex issues for privately owned, publicly listed and public sector clients and help them to find solutions. More than 35,000 Grant Thornton people, across over 100 countries, are focused on making a difference to clients, colleagues and the communities in which we live and work.

"Grant Thornton" refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton International Ltd (GTIL) and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate, one another and are not liable for one another's acts or omissions.

Contacts

Grant Thornton LLP
Kristen Bugaris
T 312.602.8277
E kristen.bugaris@us.gt.com

Contacts

Grant Thornton LLP
Kristen Bugaris
T 312.602.8277
E kristen.bugaris@us.gt.com