Global economic conditions survey: Q4, 2017

In Q4 of 2017 the number of respondents expecting conditions to worsen exceeded those expecting conditions to improve by 14 percentage points, causing the small dip in confidence this quarter. 

However the overall level is still higher than its average of the past couple of years. This is broadly consistent with the PMIs and the hard economic data, which suggest that the global economy remains in decent health.

Brexit's shadow on the UK

Economic confidence in the UK has been volatile over the past 18 months – most likely reflecting uncertainty over the country's departure from the EU – and Q4 was no exception. Despite completion of the first stage of the Brexit negotiations and trade talks on the horizon, confidence has plunged to one of the lowest readings on record. 

Depressed confidence in the Caribbean 

Confidence in the Caribbean fell in Q4 and remains firmly in negative territory. The sharp fall is probably linked to the hurricanes that caused havoc across the region in September 2017. Although the rebuilding will boost growth, the region's economies are likely to suffer in the near-term – particularly in the crucial tourism sector.

US at an all-time high

The outlook for the US economy is good, and the results of the GECS reflect this, with all of the main sub-components of the index at elevated levels. 

Confidence rebounded strongly in the final quarter of the year: 33% feel more confident about the future, and just 25% feel less confident. Overall confidence levels are now at the levels they reached at the start of the year, and remain high by historical standards. This may in part reflect hope that the recent tax changes provide a fiscal-led boost to the economy.

Looking ahead

2017 saw strong growth in all the world's major economies and despite the small dip in confidence last quarter, the outlook for 2018 remains promising.

Growth in China is set to slow slightly over the next year as the authorities double down on efforts to reduce risks in the financial sector, but the future looks bright for other emerging markets. India with its government reforms and buoyant private consumption seems capable of retaining its spot as one of the fastest-growing economies in the world. Growth in the rest of Asia should also hold up well, with exports likely to be the main engine of growth. 

The outlook for developed markets is also positive. For the US, high levels of consumer confidence, a booming stock market and the recent massive tax cut could lead to strong growth. Although its interest rates are likely to rise, the pace of tightening will be gradual and it is unlikely to derail the recovery.

About Narayanan Vaidyanathan, lead author, ACCA