KPMG Global Outlook Survey Shows Mostly Positive Sentiment

In the manufacturing sector, a net balance of +49.9 firms anticipate a rise in activity, compared with +50.9 in the last survey conducted in February. The equivalent figure for the service sector is +43.9, little-changed from the previous reading of +44.0, according to the report.   

All industry sectors are set to record higher activity during the coming year. In manufacturing the strongest rates of growth are anticipated in Electrical & Optical, Mechanical Engineering and ‘Other Manufacturing’, while the slowest rise is forecast in the Transport category. In services, confidence is highest in the Renting & Business Activities and Financial Intermediation sectors, while optimism is lowest amongst Hotels & Restaurants.  

Of the major economic regions, confidence remains highest in the U.S., where sentiment has improved slightly since February. Companies in the U.S. report a substantial degree of confidence regarding future activity. For manufacturing, June’s net balance of +69.3 is the second highest of all surveyed countries, while the figure for services is +61.2, topping the global ranking. U.S. companies generally attribute their optimism to expectations of continued economic recovery during the next twelve months, the report said.  

Although still forecasting a brisk pace of expansion, companies in the BRIC region have become less optimistic than in recent outlook surveys. June’s net balance for manufacturing is +45.7, the lowest since January 2009, while the services reading of +46.8 is the weakest of the past three outlook periods. KPMG said in both cases, the drop is in large part driven by an easing of optimism in China, where policy tightening to cool the economy has led to a dampening of near-term growth prospects. Chinese firms are now the least upbeat in the BRIC area.  

Brazilian panelists continue to signal buoyant expectations for growth. June’s net balance of +77.1 for manufacturing is the highest of all countries covered by the survey, while the services figure of +50.2 is the third-highest in the world.   

Confidence has grown in India, where positive sentiment is higher than at any time since mid-2008. In Russia, manufacturing confidence has eased slightly but remains strong, while optimism in the service sector is the second-highest across the globe.  

The outlook for business activity in Japan has strengthened since February to the highest in the past three outlook survey periods. However, the latest net balances for both manufacturing (+30.8) and services (+15.6) are well below the global averages. Japanese panelists continued to comment on muted domestic demand as a factor expected to constrain growth.