Panel: Global economy is in a growth phase rather than recovery

Does the guarded optimism about the global economy suggest we’re in a widespread recovery?

Not really, according to panellists who gathered this month for a webcast analyzing key findings of the CGMA global economic forecast.

The CGMA Global Economic Index moved up seven points to 65 out of 100 during the first three months. The GEI is a composite of 10 equally weighted measurements of sentiment, key performance indicators and spending measures.

“We’re in a growth phase,” Alasdair Ross, global product director at the Economist Intelligence Unit, said during the webcast. “It’s not time to hunker down. That time has passed. [But] there are plenty of storm clouds in the sky. The good news is the horizon remains a distance away. It’s not right on top of us.”

More than 600 business leaders who carry the CGMA designation participated in the survey, which was conducted from February 22nd to March 13th. Of the respondents, executives in emerging markets and the US were the most upbeat.

Respondents from Asia lost a little confidence as economic growth in China and India began to slow in the first quarter, but they still scored higher than their peers from the UK and the rest of Europe.

Growth rates in India and China had to come down, panellists said.

High growth rates went along with high inflation, which was not sustainable, Ross said. Slowing growth in India and China has not only tamped down inflationary pressures, but it has also taken heat out of the real estate and construction bubbles that were forming last year.

The slow improvement of the US job market is frustrating, said Jim Morrison, CFO at Teknor Apex, a manufacturer of plastic compounds in Rhode Island. US productivity gains are part of the reason, he suggested. Aside from the fallout of the financial crisis, with which some sectors of the economy continue to struggle, productivity gains are still offsetting the need to hire.

Meanwhile, IT spending has switched from technology that increases efficiencies to technology that helps with performance management and decision-making, said Morrison, who also is chairman of the AICPA Business & Industry Executive Committee.

“It’s a very uncertain, volatile time,” he added. “In my opinion, it’s all about having good people.”

For Morrison, who participated in the survey, that means not “skimping” on recruitment of new hires and retaining existing employees through training, career planning and income incentives.

“The really worrying geography remains Europe,” Ross said.

The countries that make up the euro zone have struggled with a debt crisis in Greece and deteriorating credit ratings for Italy, Spain and Portugal.

The most prudent thing for a UK company to do, said Robert Kingston, finance director for content at the British BSkyB, is to deliver financial performance and have a strong, flexible balance sheet.

—Sabine Vollmer (svollmer@aicpa.org) is a CGMA Magazine senior editor.