Big4 Firm Surveys Uniformly Indicate Weak Sentiment, Some Recent Hope

We looked at some survey results from independently conducted surveys by the Big 4 firms in recent months as a gauge for the depth and breadth of the global economic crisis and any nascent signs of its ending.

The most encouraging outlook comes from a May 2009 survey of KPMG Business outlook for EU services, which shows that the economic crisis in the region may abate over the next 12 months, though most survey variables remained at historically weak levels. KPMG found that net balances for business volumes, revenues and incoming new business all improved in April compared to those posted six months earlier. Nearly 40% of EU service providers expect volume growth, while only half 21% were expecting declines. Also, inflation fears appear to be receding as commodities decline and payrolls stay flat.

Also in May 2009, Deloitte reported some not so good news on consumer spending. The Deloitte Consumer Spending Index dropped in April as falling housing prices and rising unemployment claims offset gains from real wage growth, reduced tax burden and lower energy prices. The Index, comprising four components ― tax burden, initial unemployment claims, real wages and real home prices ― fell to 1.46% from an upwardly revised gain of 1.95% a month ago. Significantly, initial unemployment claims continue at record pace since the Fall of 2008, and real wage growth posting only small gains due to falling energy prices for energy. The final impact on an already stretched consumer are decreasing home prices, though tax credits help, mortgage financing remains scarce.

On the IPO front, an indicator of confidence in new business and capital markets, sentiment remains dull. In April, Ernst & Young found that global IPO activity continues to stall, There were a miniscule 50 IPOs worldwide in Q1-2009 raising just US$1.4 billion in capital, with only two deals raising over US$100 million. This compares with 78 IPOs worth US$2.6 billion in Q4-2008 and a rousing US$41.2 billion in Q1 2008. There seems to be some hope in the pipeline, with some companies continue to ready themselves to go public while waiting for market conditions to stabilize.

In January 2009, in sync with the World Economic Forum at Davos, PricewaterhouseCoopers revealed its 12th Annual 2008 Global CEO Survey, which painted a gloomy picture in the corner office. CEO confidence plunged to its lowest level since 2003, with only 21% of global CEOs saying they were very confident of revenue growth in the next 12 months, down from 50 per cent in last year's survey. And more than a quarter of CEOs said they were pessimistic about prospects for the coming year. CEOs worldwide were also gloomier about longer term growth as well, predicting a slow recovery. Only 34% seemed very confident of growth over the next three years, down from 42% last year

In April 2009, Grant Thornton LLP, the U.S. member firm of Grant Thornton International Ltd, found that 77% of US CFOs and senior comptrollers said the U.S. economy will remain the same or get worse in the next six months, and 39% expecting their company's headcount to decrease. Only 31% expected their company's financial prospects to improve. More significantly, 87% thought that the U.S. economy will remain in a recession through the end of 2009.

These surveys conducted by reputable organizations surveying different group of business leaders and using different methodologies yet arriving at similar results indicates that uniformly economic sentiment remains very weak among company executives, worries about future growth, continued recession and dull employment prospects seem to predominate. The most recent KPMG survey seems to offer some green shoot of promise and we may begin to look at these surveys from all the Big Four firms as another leading indicator of sentiment and action as the world hopefully pulls itself of this economic mess in the short term to everyone’s great relief.