Grant Thornton Survey Indicates Optimism Returns to Pre-Recession Levels

A little under a month ago (May 14, 2009) we blogged about a number independently conducted recent surveys by the Big 4 firms as a gauge for the depth and breadth of the global economic crisis and any nascent signs of its ending.

http://bigfouralumni.blogspot.com/2009/05/big4-firm-surveys-uniformly-indicate.html

At that time, surveys were uniformly negative and echoed much pessimism about current conditions and future prospects. There were only a few glimmers of hope among participants for any chance of near-term recovery.

We have been brought back to this topic again by Grant Thorton’s Business Optimism Index, a confidence measure of U.S. business leaders, which jumped sharply to pre-recession levels and offered a case for much optimism.

The index jumped very sharply from a (historic) low of 35.6 in November 2008 to 54.5 in May 2009 just a tad below 54.7 in November 2007 when the US recession just began.

When asked, “Do you feel the U.S. economy will improve/remain the same/get worse in the next six months?”, 45% of participants said improve, 43% said remain the same. Only 13% said it will get worse, down sharply from 63% in November 2008

When asked, “How optimistic are you about the growth of your own business over the next six months?”, 9% respondents are very optimistic, 53% are somewhat optimistic (up from 37% in November 2008), 38% are somewhat or very pessimistic.

Finally, a very interesting question, “Do you expect the number of people you employ will increase/remain the same/decrease in the next six months?”. And surprisingly, the results were:
Increase: 20%, up from 9% in February 2009
Remain the same: 50%, up from 43% in November 2008
Decrease: 30%, down from 45% in February 2009

Grant Thornton also asked another pointed question, “When do you think the economy will come out of recession?” 15% said second half of 2009, 54% respondents said the first half of 2010, 24% said sometime in the second half of 2010 and 6% said not until 2011.

The full survey is available at http://ow.ly/dlIq

We turned to other Big4 surveys and found some support for this optimism.

In KPMG’s March and April 2009 survey of insurance executives, they report, “
The results show that more than half the respondents expect an improvement in organic growth (55 percent) and expect an improvement in growth by acquisition or take-over (53 percent) during the next 12 months. Respondents are also positive about their business prospects as they relate to premium volume (say 53 percent), expense ratio (say 53 percent) and capital reserves (say 47 percent). They are least positive about their share price, with only 40 percent of respondents expecting to see an improvement in this area.” (http://ow.ly/dlIl)

Deloitte looked at UK hotel performance from January to May 2009, and found that, “Whilst revenue per available room (revPAR) is still negative, the pace of decline is reducing and some markets are actually showing gains on 2008 numbers with strong leisure demand driving up weekend occupancies and revenues. There is also a trend of improving performance in the weekday corporate business market in London.” (http://ow.ly/dlId)


Today, June 10, 2009, PricewaterhouseCoopers’ Private Company Trendsetter Barometer shows, “Efforts to succeed in the current climate include both cost-cutting and revenue generating measures. More private companies are focused on cost reduction than on new revenue generation, even though those companies focused on new revenue generation report much stronger projected revenue growth over the next 12 months than their cost-cutting counterparts (7.4 percent and 0.6 percent, respectively). Those planning a combined approach fell to the middle at 2.3 percent.” (http://ow.ly/dlI7)


On 28 May 2009, The Ernst & Young Mining eye index gained 29% over Q1 2009, supported by steady upward momentum in the prices of some key traded metals, a big change for an index that lost 46% during the previous quarter and 75% over 2008. However, the Mining eye still remains some 71% below its 2008 (and record) high and 26% below its 2004 base level. Further, “ Quarter one showed signs of cautious optimism for AIM’s junior miners with secondary fundraising in the sector totalling £239 m, compared with £147 m in the previous quarter, and £295 m in Q1 of 2008, indicating that funding is available for the right projects. However, the full impact of the global economic slowdown has yet to be realised. AIM’s miners continued to warn of critical working capital constraints and some entered into voluntary administration arrangements or defaulted on credit payments. The number of mining companies delisting also rose to nine this quarter” (http://ow.ly/dlHV)


In our previous blog, we said, “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.”

And Grant Thornton’s larger scale US surveys, supported by unrelated data points from other Big4 surveys, seems to indicate that optimism to a large measure has returned to the executive mindset and managers seem to be positively oriented towards higher growth and better future prospects. Economists all across the world are saying that the worst seems to be over just about now, (and while not fully loosing our skepticism), we may cautiously join in that refrain.