U.S. finance executives lead in global rankings on economic optimism, according to a new survey from American Express (NYSE: AXP) and Institutional Investor Thought Leadership Studio. Across the globe, expectations for “substantial” economic expansion have hit a 10-year high (38%), indicating a surge in optimism. U.S. expectations for substantial economic expansion lead the world by a wide margin (69%, up from 23% last year). Seventy percent of executives worldwide anticipate either “modest” or “substantial” growth this year, up from 64% last year.
With this indication of improving global business prospects, companies’ spending is forecast to increase in the coming year. The number of respondents overall anticipating moderate spending and investment (76%) was up substantially from last year (55%). Moreover, the proportion of respondents anticipating tightly controlled spending and investment dropped, from 26% in 2016 to only 6% in 2017.
The findings in the 2017 Global Business & Spending Outlook by American Express and Institutional Investor¹ are based ona sampling of 650 senior finance and other corporate executives of firms with annual revenues of $500 million or more, located in North America, Europe, Latin America², Asia and Australia. Responses were gathered in late November and early December 2016. The results of this cross-industry study were issued today by American Express.
“After years of embracing a do-more-with-less mantra, many large and global companies are ready to shift into growth mode,” said Brendan Walsh, Executive Vice President, American Express Global Commercial Payments. “Companies are loosening their purse strings to take advantage of improved opportunities, while at the same time focusing on top-line growth, on continuing to improve profitability and on ensuring they remain competitive.”
Staying Competitive, Factors for Success
Large companies are competing on a highly competitive playing field that will require a new level of technological and managerial savvy. More than half (53%) of all finance executives surveyed identify remaining competitive with other companies as among their top business goals for 2017, followed by better meeting customer needs (48%). To stay competitive, the overall polled group of businesses will focus on a number of areas including:
- Customer Service
- 50% say pressure on their companies to compete on the basis of customer service has increased substantially in recent years
- 81% anticipate spending more to improve customer service over the next year
- Environmental, Social and Governance
- 50% strongly agree that sustainable, ethical and transparent business practices will be an important basis for competition in their industries in the near future
- Sophisticated Data Analytics
- 90% agree that sophisticated data analytics have become a more important basis for decision-making at their companies in recent years
- 89% say they will spend at least somewhat more time, attention and money on improving analytics capabilities over the next year
- 58% say their companies will spend much more of these resources on improving analytics capabilities over the next year
Majority Anticipate Increased Workforce, Tap into ‘Gig Economy’
As companies worldwide increase spending with an eye towards sustained and profitable growth, they will seek to employ more workers in 2017. Eighty-five percent of all survey respondents anticipate an increase in their companies’ number of employees in the coming year (vs. 75% last year). The percentage of respondents anticipating that their companies’ employee count will stay the same or decrease has correspondingly dropped, from 25% last year to only 15% this year. On average, finance executives expect headcount to increase by 7% for 2017. (See Expected Employment Increase by Country Chart for Individual Country Results)
Respondents’ highest priority for hiring is in finance talent (21%), followed closely by general admin/support staff (19%). Companies also recognize that difficulty hiring and retaining sales and support staff is impeding their ability to meet performance goals (93%).
The gig economy continues to be a major force in the global labor market:
- 63% say they’re likely to make greater use of temporary or contract workers in order to meet staffing needs for the coming year
- 70% confirm that the use of independent contractors or temporary workers is central to or an important part of their companies’ employment practices (up from 60% in 2016)
Snapshots by region
North America Most Strongly Optimistic Region in the World: Most Likely to Plan Increased Hiring
North America now has the most optimistic outlook on economic prospects worldwide. The percentage of respondents in North America anticipating substantial economic expansion is at its highest level (67%) for any region since this study began in 2008 (see “Expectations for Substantial Economic Growth by Region, 2008-17” chart). Canadian finance executives are nearly as optimistic about their economy as their American counterparts. Ninety-three percent of Canadian respondents expect either “substantial” or “modest” expansion, up from 63% last year. In the U.S., 95% of respondents anticipate “substantial” or “modest” growth, compared with 73% last year.
On average, North American respondents expect their companies’ planned levels of spending and investment for the coming year to increase by 9% (vs. 13% last year). At the country level within North America, the U.S. averages at 9%, compared with the 14% response for 2016. The Canadian average is 8%, vs. 11% in 2016.
American finance executives are most likely to anticipate increased spending on production inputs (37% of U.S. respondents). Spending in other categories tied to production and service delivery, including labor/headcount (32%), is also likely to increase among U.S. companies. A substantial number of U.S. respondents also anticipate increased spending on financial reporting and compliance (30%). Canadian respondents are particularly likely to expect increased spending in IT categories including mobile technology (30%) and hardware/IT infrastructure (27%). Like their U.S. counterparts, Canadian companies also anticipate increased spending on production inputs (27%) and labor/headcount (27%).
In North America, finance executives anticipate hiring to increase by 9% (vs.12% last year), the highest average forecast of any region. The U.S. (9%, vs. 13% in 2016) and Canada (9%, unchanged from 2016) are among those countries at the top of the list predicting an uptick in hiring. Both American (96%) and Canadian companies (93%) say their performance goals have been affected most by difficulty in hiring sales and marketing personnel. In order to address their hiring challenges, both Canadian and U.S companies will make greater use of temporary or contract workers (59% U.S. and 53% Canada) and plan to onshore positions (58% U.S. and 53% Canada).
European Economic Expansion Plans on the Decline: U.K. Least Optimistic, Optimism Also Erodes in France and Germany
In Europe, expectations for economic expansion have declined year over year, with 33% of respondents expressing optimism, down from 62% in 2016. The U.K. while most positive in the region, experienced the greatest drop in optimism, with one-third (33%, down from 75% in 2016) expecting economic expansion. Optimism also eroded in Germany, where 30% of respondents anticipated economic growth (down from 57% last year), as well as in France (30%, down from 47% last year) and Russia (30%, down from 44% last year).
Uncertainty around Brexit’s knock-on effects and upcoming European elections likely underlie these results.
Germany Plans Greatest Increase in Hiring in Europe
On average, respondents in Europe expect to see an increase in hiring of 7% (compared with 6% last year). Finance executives in Germany are most likely to plan to hire (9%), among the highest in the world, followed by Russia (7%), France (7%), and the U.K. (6%). Regardless of country, European companies are in agreement that there is difficulty hiring sales and marketing staff. In Russia (100%), the U.K and Germany (each, 97%) and France (85%), companies say their performance goals have been affected by difficulty in hiring sales and marketing staff. To combat their hiring challenges, companies in Russia (70%) and the U.K. (65%) will make greater use of temporary or contract workers, and in France (70%) and Germany (67%) they will make greater use of offshoring or outsourcing.
Asia/Australia: Majority Predict Economic Expansion, Optimism in Japan Rebounds
In Asia/Australia, a majority of respondents (84%, up from 58% last year) anticipate economic expansion over the next year. Optimism in Japan has rebounded (97% choosing substantial or modest economic expansion, nearly double 50% in 2016). China has also seen a sharp rebound in optimism (87%, up from 58% in 2016), helping to buoy prospects across the region. Australia has seen a rise in optimism as well (83%, up from 65% last year). India has a less positive outlook, where optimism has eroded (77%, down from 86% last year).
India Predicts Greatest Increase in Hiring Regionally
On average, respondents in Asia/Australia expect to see hiring increase by 6% (compared to 8% last year). Indian and Chinese companies plan the greatest increase in hiring (each, 7%), followed by Australia, Hong Kong and Singapore (each 6%) and Japan (5%).
Executives across Asia/Australia say their performance goals have been affected by difficulty in filling sales and marketing positions: Hong Kong (100%), China and Japan (each, 97%) and Australia and India (each, 83%). In order to address their hiring challenges, companies in Australia (80%), China (ex-Hong Kong), Hong Kong, and India, (each, 63%) are particularly likely to make greater use of temporary or contract workers. Companies in Japan (63%) are especially likely to move positions from overseas to domestic locations.
Latin America: Uptick in Economic Confidence
In Latin America, eight-in-ten respondents (80%, up from 73% last year) anticipate expansion in 2017. Optimism in Argentina increased by a substantial margin for the second year in a row (94%, up from 73% last year). Brazil showed a more modest increase, with 73% of respondents expecting expansion over the next year (compared with 67% last year). The relatively modest improvement is likely a reflection of political uncertainty. Optimism in Mexico eroded slightly, with 73% of respondents anticipating expansion (down from 79% last year), most likely related to uncertainty regarding trade relationships and agreements.
Argentina Anticipates Greatest Increase in Hiring Regionally
In Latin America, Argentina and Brazil are most likely to anticipate an increase in hiring (with each anticipating an 8% increase) followed by Mexico (anticipating a 4% increase). Although respondents in Latin America seem to feel the shortage of sales and marketing talent slightly less acutely than respondents in other regions, finance executives across the region most often say that difficulty hiring sales and marketing talent is impeding their companies’ ability to achieve their performance goals: Argentina (94%), Brazil and Mexico (each, 85%). To combat their hiring challenges, companies across the region will make greater use of temporary or contract workers: Mexico (70%), Argentina (68%) and Brazil (67%).
Expected Employment Increase by Selected Countries:
|China (ex-Hong Kong)||7%|
Click here for the full Global Business & Spending Outlook by American Express and Institutional Investor Research.
The 2017 Global Business & Spending Outlook was conducted by Institutional Investor Thought Leadership Studio1(IITLS) and is based on a survey of 650 senior finance executives from companies around the world with annual revenues of $500 million or more. All survey responses were gathered after the 2016 U.S. election, in late November and early December 2016. IITLS estimates the margin of error for this population to be approximately +/-3.8% at a 95% level of confidence.
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2In the Global Business & Spending Outlook, Mexico is grouped with the Latin American economic region due to economic similarities, rather than with the United States and Canada.